Q1 2022 Root Inc Earnings Call
Good day, ladies and gentlemen, and thank you for standing by welcome to the route incorporated first quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. After the after the <unk> presentation, you will hear a question and answer session.
The question during the session you will need to press Star then one on your telephone keypad at.
At this time I would like to turn the conference over to MS. Christine Patrick Ma'am.
You may begin.
Good morning, and thank you for joining US today route is hosting this call to discuss its first quarter 2022 earnings results participating on today's call are Alex Tim co founder and CEO and Dan rather.
Synthol, Chief operating officer, and Chief revenue Officer. During the question and answer portion of the call. Our presenters will be joined by not been knocked the port Chief Technology Officer, and Frank Palmer, Chief Insurance Officer.
Last evening brewed 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 operator.
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.
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 in talking about routes performance you can find the reconciliation of those historic measures to the nearest comparable GAAP measures in our shareholder letter released last evening in our filings with the SEC each of which will be.
Posted on our website at IR Dot joined route Dot Com I will now turn the call over to Alex Tim roots founder and CEO .
Thank you Christine in the first quarter, we took aggressive actions to position the company to continue to weather one of the most difficult environments. We've seen as a young company our focus on capital preservation led to dramatically reducing fixed expenses rapidly changing rates Tampa.
Down growth and marketing spend and tightening underwriting on the least profitable segments of our business.
At the same time, we continued to make progress on what makes us special.
Building World class products to the very best technology for our customers.
At the end of the first quarter less than six months after announcing our exclusive partnership V. One of the embedded product was available to roughly 65% of carvana customers.
In addition, we made further improvements to our product flow together, resulting in 13% of new premium volume coming from this channel.
We expect V. Two of our embedded product to launch in the second quarter. This version will allow customers to quote and bind Carvana insurance built with route without leaving Carvana. This platform.
We've reduced the number of screens before checkout from the initial 24, Dennis six with this latest version now down to three.
This is delivered a more integrated and elevated customer experience.
I invite you to experience V twos capabilities through a demonstration of the product.
A link to which can be found in this quarter's shareholder letter we are laying the foundation for a highly defensible growth channel with our fully embedded product.
In addition, we are building a complimentary brokerage product to offer the embedded experience to all of Carvana customers. We believe we are at the beginning of a growing trend to transform the insurance purchasing experience to one that occurs at a time that works best for the customer.
Our technology allows <unk> to meet customers in their time of need with a seamless frictionless and simple experience.
Powering our embedded offering is our industry leading developer experience.
We have a clear vision to make our embedded offering something that any developer can implement in less than an hour.
During the quarter, we made further progress on strengthening our underwriting which has resulted in a 12 point sequential improvement in loss ratio, Dan will give more color on the underwriting actions. We believe these actions will materially improve our results Wow building defensible growth with a focus on building industry.
Three leading customer products through better technology, we are able to move faster than our competition.
Four I turn it over to Dan I'm very excited to welcome Rob Bateman into our executive team as Chief Financial Officer, Rob significant experience in the insurance industry and deep financial expertise will be pivotal in driving the company's success. He looks forward to presenting in future quarters and thankful for their tenacity and hard work that our.
Our employees demonstrate everyday I appreciate the trust of our customers and investors and with that I'll turn the call over to Dan.
Thanks, Alex and good morning, everyone.
Our results for the first quarter of 2022 reflected significant strides forward in strengthening our underwriting performance and developing our embedded offering.
You will find our full GAAP financial results contained in the shareholder letter, we published yesterday evening, but we wanted to give a few of the key highlights.
On the topline gross written premium declined 8% year over year to $187 million.
Our gross earned premium increased 9% year over year to $175 million.
The top line decline reflects a significantly lower level of marketing spend compared with the first quarter of 2021 partially offset by increased retention and more new business than originally anticipated.
We believe the new business volume is being driven by seasonal trends and shopping behavior.
Shifting to profitability.
Most accident period loss ratio was 81% for the first quarter, a 12 point sequential improvement versus Q4, 2021 and a 27 point improvement from first quarter of 'twenty and 19, the most recent year not affected by the pandemic.
By leveraging our modern infrastructure, we have responded quickly getting rate and underwriting changes into market and are experiencing improvement more quickly than most of our peers.
Our technology advantage can be seen in our rate filing process.
First we have built a self service environment with roughly 85% of our rating change analysis workflows fully automated.
Through this we can rapidly make improvements to our pricing model better predicting losses.
Second we are able to seamlessly implement the new models into our rating plans.
This allows us to provide regulators with real time data to support current rate needs.
And lastly, once approved we are able to ship new rate plans immediately getting needed rate into market quickly.
The operating changes we have made are improving our financial performance operating loss was $71 million, a 25% improvement when compared with the first quarter of 'twenty 'twenty. One adjusted EBITDA improved 43%. This is a new K P. I, we have introduced this quarter.
To give a clearer view of the underlying performance of our business, excluding certain noncash and other items.
The primary driver of this reduction was our concerted effort to lower expenses.
We continue to find efficiencies within the company to reduce capital consumption, while investing in opportunities that present high return potential.
We have moved past our peak expected cash burn year in 2021 .
During the first quarter operational changes have resulted in a 23% sequential reduction in non loss in L. A E expenses or 42% compared with the first quarter of 2021 we.
We ended the first quarter with $736 million of unencumbered capital compared with roughly $450 million at the end of 'twenty 'twenty. One the increase was primarily driven by closing the 300 million dollar Black rock term loan facility during the quarter.
Turning to our outlook, we continue to expect gross written premium to reflect significant year over year declines in the first half of 2022 as we take underwriting and pricing actions leading to meaningful improvement in our operating losses.
With a further reduction in marketing costs and fixed expenses, we expect approximately 25% improvement in operating losses in the first half of 2022 compared with the first half of 2021 excluding restructuring charges of $9 million to $12 million.
$7.8 million of restructuring charges were recognized in the first quarter.
I would like to Echo Alex's statement that we are using our differentiated model to thoughtfully navigate through a challenging environment.
The actions that we've taken demonstrate our thoughtfulness around deploying capital and position us to become stronger than we have been at any other time in the company's history.
And we are not finished our near term goals are very clear continue to strengthen our technology advantage and underwriting foundation, while building out our differentiated product. We're excited about the opportunities before us and appreciate your continued support.
With that Alex Frank Matt and I look forward to your questions.
Ladies and gentlemen, if you have a question or comment at this time. Please press Star then one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue simply press the pound key.
Again, if you have a question or comment at this time. Please press Star then one on your telephone keypad.
Our first question or comment comes from the line of Josh Seigler from Cantor Fitzgerald. Your line is open.
Yes, hi, good morning, Thanks for taking my call, obviously, Youre underwriting technology advantage played a big role this quarter.
What areas do you plan to invest to make sure your routine that's advantage moving forward.
I think thanks for that a question it really we continue to invest really throughout the entire.
Pricing and technology and actuarial stack in this quarter, we materially improved the amount of automation that we have currently for for actuaries and actually took the percent of our actuarial workflows that we're 100% automated from about 50% to 85% and we're continuing to invest there.
So that really as we continue to progress.
The machine can do more and more of the work for us.
And allow us to continue to very rapidly steady trends in the market get those inside of our data science models, and then actually reflect those in rate plans and I think that's exactly what you saw this quarter and Thats, what youre going to continue to see from us.
Excellent that's helpful. And then I'd also appreciate some additional color on the brokerage platform idea what level. The reinvestment are required for this expansion and do you expect it to be accretive in 'twenty two.
So that the brokerage program.
Is it something that allows us really to broaden the customer experience to even more customers and so areas, where it might not we aren't licensed or we arent selling them.
Selling our own insurance product, yet or areas, where is the risk just doesn't meet our underwriting appetite. It is not an aggregator experience. We are really looking to highly personalized and select the best possible carrier for each customer that comes through our platform and we've been working very hard on that and I appreciate.
Right the work of the team at <unk>.
Gobble and Chris Brian has had both really really done an excellent job there and we appreciate that and we expect that actually will launch later in Q2 in terms of the results and our expectation for this year I will pass it to Dan and he can talk a bit about that yeah. Good morning, Josh and thanks for that.
Thank Alex just talked about we expect to ship the brokerage product in Q2.
We expect will come back and talk to you on the Q2 call as well as our Investor day, which we're looking forward to in September about the plans for the go forward.
Excellent. Thank you very much.
Thank you okay. Thank.
Thank you. Our next question or comment comes from the line of Mike Phillips from Morgan Stanley . Your line is open.
Hi, you actually have a small dabble in the lines of Mike Phillips.
I have just.
Just one quick question. So could you talk about why the Carvana channel is defensible why do you think it's defensible 10, other I dunno insurers do this with other car sellers of other Oems.
Yeah.
This is something in there theres been other insurance companies now for decades actually that have tried to really crack the embedded experience and.
And we believe that in order to truly build a customer experience that is seamless for the customer that you really do need to be built on a modern technology stack, because it's very difficult to actually completely embedded insurance purchasing experience and offer a seamless quote and bind to that consumer with very few questions being asked and.
Route really having been built on technology from the ground up we're able to do that and so we're able to really partner with Carvana also is obviously, a digital company and we think that we have.
Very strong alignment in terms of our customer our technology and our cultures are we were able to come together and really actually deliver a tech experience that is very different I'm going to pass it over to Matt, But act, where our CTO, who can talk a bit about why our technology. We believe is very differentiated yeah. Thanks Alex.
Our approach to the embedded channel aligns with our approach to the direct channel to build world class customers.
<unk> products through the very best technology for our customers.
In the case of the embedded channel our customers are not only potential policyholders, but also our embedded partners and specifically the developers at our partners and so what we aim to do is create an easy delightful experience for the developers when they're introducing the insurance purchase.
Part of the customer funnel and what allows us to do that when compared to say Oems is that we've been doing this for years, we've invested heavily in the back end systems that allow for data collection quote customization binding and when necessary proof of insurance and we're standing on the shoulders of Giants.
In order to ensure that developer experience as easy and seamless and truly differentiated.
Great. Thank you just a quick follow up question so alright.
Curious on your reinsurance contract with things such as needed as a percentage of your direct earned premium has been hovering around that.
At mid 50% range since you.
It had to restructure your reassurance contract, but one of your partners I'm just wondering how we should think about that going forward also.
It says you have to change your strategy and your childhood dollars your profitability with their growth how have your reinsurance partners reacted to that.
Yeah. Thanks, This is Dan and I appreciate the question.
Nothing has changed with regard to our reinsurance strategy and plans.
We are in fact in the process of negotiating our next treaty right now and continuing to see strong support.
From a capacity standpoint, as well as from a quality of the partner standpoint.
Session level will be consistent.
With what we've talked about previously and.
And the other thing that I would add is we're seeing the reinsurers really like the business thats coming through the funnel in terms of the Carvana business and that's contributing to their support of the company.
Thank you.
Thank you. Our next question or comment comes from a line of Juran Qunar from Jefferies. Your line is open.
Hey, Good morning. This is Andrew on for your own.
Could you rank the four drivers that you called out for the sequential improvement in the underlying loss ratio from mostly impactful I think you've discussed rate increases, earning in underwriting actions tenure mix and seasonality trends.
So this is Frank.
I'd say that the rate actions was probably number one but the other three are kind of all important we do have some seasonality on that and some tenure mix, but most of it was the underwriting and rating changes.
Okay.
Just real quickly Andrew I would just add this is Dan.
Your question was around earning in.
You won't see as much of that in the quarter from the rate actions, you'll see that start to earn in in future quarters.
But I think Frank is right in terms of the aggressive actions that we've taken throughout pricing and underwriting obviously it spoke for itself the data around.
The <unk> rate increases in earning and 19% is starting to earn in 19 percentage points.
Great. Thank you and Alex I think you mentioned or I think I heard that the Carvana version two will be available to all national customers I suppose I just want to make sure I heard that correctly and what order of magnitude on attachment rate are you kind of anticipating over the course of 'twenty two.
We didn't.
The need to we are not anticipating a ship nationally to all carvana customers at this point as we end up launching our brokerage offering and getting that into our market. That's when we believe that will actually have a closer or.
100% of the other carvana customers coming through our flow.
In terms of attach rates, we have seen really positive trends to now you know we launched the product.
Less than six months after the original partnership which is really a testament to our technology differentiation and our ability to very quickly and seamlessly integrate with partners and since then we've actually developed some really incredible technology that.
That is really materially increased our attach rates and we plan to continue that work over time, and we certainly aren't slowing down if anything we're speeding up and all of those learnings and all of that technology that we're developing we think is broader to we think we can continue to replicate that across multiple partners and as we.
To hone in on the developer experience, we see a world, where we will talk to a partner on a Monday and in by a Friday there'll be alive.
Yeah.
Great. Thank you.
Yeah.
Thank you. Our next question or comment comes from the line of Tracy Venturi Chewy from Barclays. Your line is open.
Thank you good morning, a follow up on your brokerage platform Im curious to other insurers want to get in their car.
On the product and this is a way you can scale that up and if I could also add overtime could you envision your victory almost shifting where we could expect more fee income rather than premium.
Yeah Tracy thanks for the question.
From the moment that we announced the Carvana deal last August we started getting calls from other insurance carriers. It was transformational in terms of how.
Other carriers saw what Richard is doing and it's a lot of what Alex and Matt talked about earlier in terms of the type of customer that we are approaching and how we're connecting with them from a customer experience and speed standpoint, so absolutely.
Not just carvana, but the embedded product that we're offering other carriers are seeing that we are attracting a customer segment that they want and were doing so with an efficiency.
They don't have and so that's something where it is contributing to very productive conversations in terms of how it impacts our numbers and our business model and our fee income works flooring frankly, a variety of different options as as you might expect we're constantly looking at options to create the best use of capital.
Drive sustainable returns for our investors and still produce and maintain a differentiated customer experience. So there are multiple economic models that we're discussing with.
With carriers again, not just for Carvana, but for the broader embedded channel and I expect we'll come back and talk to you about that in the quarters ahead.
Alright excellent.
Your shareholder letter you mentioned, a 12 point sequential improvement in your gross accident period loss ratio to 81% from 93%, but I couldn't help but notice that last quarter, you reported a 91% gross accident period loss ratio actually it looks like you raised your loss pick.
It looks like you did the same thing for your third quarter 'twenty one loss pick. So my question is what drove that and if you have a track record of raising law.
Subsequent periods.
How confident are you with your current 81 per carton packed.
That's the first I would say, we definitely do not have a track record of.
Increasing loss picks if you look back historically over our quarters.
We do see noise in reserves to some degree, particularly relative to the immediate preceding accident period.
As those claims are a little less.
Developed than broader claims and that's true this time as well we saw this development really from the Q4 accident period.
And you will you will see some minor swings.
Plus or minus in those recent accident periods going forward.
For this quarter, particularly.
No. It was not a IV in our claims that we didn't expect coming through it was really a result of material damage wear.
We think that the severity was slightly elevated and now we feel very confident in our reserve adequacy.
Okay and the path you shared your frequency and severity is that something you could share with your current view.
Yes, so compared to quarter, one of 2021 severity and frequency severity or both up as far as the magnitudes were not going.
I'm going to share those at this point, but we do see miles driven has increased versus quarter. One of last year. So that helps drive the frequency and then of course, the supply chain issues and material damage costs are well known.
Thank you.
Thank you. Our next question or comment comes from the line of Matt <unk> from JMP. Your line is open.
Hey, Thanks, good morning.
Hum.
I want to ask couple of questions on the Carvana relationship.
Are you can you give us some color just broad strokes in terms of the business you're capturing there.
How much is switching from another carrier versus coming into it not having insurance or maybe not having a car and then buying insurance for the first time or buying a new policy.
Hi, Matt, It's Dan and good morning, Thanks for the question.
We're seeing real success with the Carvana partnership in multiple different ways. The product focus is fantastic. We've uploaded the demo for those who want to see it live we think it's highly differentiated and you can take a look at that and and customers are responding to that and to your point, it's a better customer from a segment standpoint.
From a retention standpoint.
And from a switching from another carrier standpoint.
We won't get into specific numbers as of yet, but a significant majority of the customers that we are transacting with via the Carvana channel are coming from another carrier. We're really excited about the chance to meet that customer within the car buying experience at a natural point to be thinking about insurance and with a totally differentiated.
Customer experience and offering.
So we're excited about where the partnership is today. We're excited is as we've talked about with where the differentiated technology has application to other partners.
And we will come back in the quarters ahead and talk more about it as we get V. Two end market.
And you mentioned it there and in the letter kind of about how these customers seem to be higher retaining should I interpret that as you're not building a non standard book of business or should I interpret that as like the retention is even better than kind of what you'd normally see in our standard book of business kind of what what's kind of the reference point.
Sure I'd say that the root direct is kind of representative of car drivers in the U S and the Carvana customers. In contrast tend to be more preferred the cars are newer cars are more expensive they tend to be more full coverage all of which are correlated with preferred characteristics. So the data is still thin.
So it's hard to tease out how much of that improved retention is just because theyre more preferred versus that carvana relationship. We believe that we're seeing bump from both of those aspects, but it's hard to tease out how much from each one.
Okay, Great and then one last question if I could you made mentioned in our letter of embarking on you'd be up five point O. I was hoping you could just give us a little color in terms of what the major changes there are that that we might expect and also if you could touch on just kind of through the traditional kind of direct channel. The Onboarding test drive period kind of what where where does that.
Stan now kind of how is 4.0 impacted that and do you expect that to be shortened further by five point out.
Yes. Thanks for the question. This is a map of okta for we are deep in the R&D for <unk> five point now getting to the end of the R&D process and pivoting to our implementation process.
Based on all the investment we've put into this infrastructure.
To iterate very quickly test out new telematics features in the model and new modeling techniques and we are seeing conclusive improvements to the 4.0 predictive power, but not only that to your later question. We are going to be focused on driving down the test drive period. So that goes into the test drive can get quotes early.
<unk>, which of course will help with our conversion rates and the customer experience.
Great. Thanks for the answers.
Thank you.
Thank you. Our next question or comment comes from the line of Western Bloomer from UBS. Your line is open.
Hi, Thanks first question is on the rates, you've taken cumulatively and across your book in the quarter. Yes. The question is how much more of your book or how much more of your book do you need to become rate adequate or just trying to gauge that in context of what level of rate increases we could see in the QQ and year to do.
Eight.
Sure. That's a great question first let me start by asking Hey, what's trend going to be the rest of the year.
So we think that we have taken a ton of rate both third quarter of last year fourth quarter last year. We were in early as we saw the trends increase.
We've taken a bunch of rate and underwriting actions in the first quarter of this year.
We do think that we're going to need some more rate. The rest of this year a lot of that is going to depend upon the trends as we see them play out we're watching very closely the supply chain, we're watching the gas prices and how people driving does or doesn't change is the gas price rises.
So we think that we won't need as much as we took in first quarter, but we still need to take some of the rest of this year.
And I'll also add to that.
We are very well positioned as I believe Q1 has shown.
To leverage our technology, so that as those trends and add some of this uncertainty doesn't unfold, whether it's increased supply chain issues from a war in Europe or what have you. Our technology has been built to respond quickly. That's how we achieved what we achieved in Q1 and if we need more more rate it will the machine will.
Work again.
Great.
On the trend and Sir.
Curious I'm not sure if you're going to disclose this but what are you assuming for used car prices as we move throughout the year I know that's been the biggest driver in the increase in severity. So curious on kind of how youre thinking about that from a loss trend perspective.
Yeah. So so again, we monitor this on a monthly and weekly basis I'm not going to disclose exactly what we think it might be for the rest of this year. We do think that it's going to remain elevated compared to last year might see some more increase but certainly don't expect as much of an increase in 2022 as we did in 2021.
Got it thanks.
You also mentioned that new business was higher than originally anticipated was any of that related to carvana.
Saying that in context of the 13% of new premium volume from Carvana in shaping my extra expectations for the future.
Yes, I think.
Good question Weston, we obviously disclose the Carvana business was 13% of our new writings.
Carvana as a channel was ahead of forecast for the first quarter.
That's in part due to the reach that we had and the response from consumers.
I would still view the Carvana channel as that test and iterate, we are putting in place a highly differentiated version. Two later this quarter, we're excited to get that into market, but I don't want to speculate on the number of new writings that will come from that channel as we go forward. There's a lot on the product roadmap, we're tremendously excited about.
And optimistic about for the rest of the year.
Great. Thanks for the answers.
Thanks.
Thank you again, ladies and gentlemen, if you have a question or comment at this time. Please press Star then one on your telephone keypad.
Our next question or comment comes from the line of March useful crews Youre line is open.
Yeah. Thank you good morning.
When we think about 2021 you've talked about the good results with Carvana. What is the overall kind of mix of growth look like in terms of the different channels.
Just roughly speaking maybe just.
Well, you know priority Carvana paid search.
Maybe independent brokerage kind of how does that shape out when you think about that.
Next few quarters.
I wouldn't.
When we think about the next few quarters in the long term.
Really we believe that the embedded platform is really just in its very early chapters and we do anticipate that because that platform works better for consumers and through our superior technology that we will be able to disproportionately grow that channel.
That said, we obviously are still investing in our direct channel we have pulled those back recently and some of those investments back recently as we've seen the loss trend, which we think is prudent capital management.
And then we will we plan to Reaccelerate those ads.
As we become more rate adequate.
Yeah, I think the Mark this is Dan I would just add I would echo what Alex said earlier that the inflationary pressures have really allowed us to showcase the power of our technology that has been our focus that is reflected in the first quarter as pricing and underwriting loss ratio related results and that's really three straight.
Quarters that we have been highly focused on that I think for us we've been tuning the model from a growth perspective to then scale it.
As you know, we proactively pulled way back on marketing spend when we started to see the shift in trend.
We feel good about where we're getting to from a pricing and underwriting perspective getting that foundation is solid and along the way tuning the model indirect marketing NME embedded channel to then offer us the opportunity to scale. It will come back on the Q2 call and then at the Investor Day in September and we will talk more specifics.
Got it.
When thinking about the Carvana relationship you talked about I think 65% of sales nationally have exposed to the version one.
When you think about the number of Carvana customers, who actually.
Presented with the offer and get a good.
Last week pitch on get exposed to the technology.
How deep is the penetration for that kind of experience big screens that you would want them to have.
When we think about all carvana sales.
Yeah, Mark I think it's a good question and I would encourage you to look at the demo and just go through the Carvana flow. What you will see is we think carvana is really transforming the car buying experience.
And if you look at their results they grew preferred customers year over year, and we really believe in what they are innovating in the car buying experience. When you go through their funnel you buy the car. You then have the opportunity to finance. The car. You then have the opportunity to add service and warranty and as you'll see in the demo.
Then have the opportunity to buy insurance to go in that package. So that is it's really a very natural part of the car buying experience.
It's a seamless integration into the flow.
And that's what we have in market today, we're really excited about the two coming later this quarter that will step it up from there and then obviously, we'll continue to iterate on the product as we go forward.
So that 65% reflects a good kind of penetration rate of our customers that are presented with the offer.
The 65% reflects.
That just the percent of the the geographic area that we are currently live with the product in our attempt to answer that question does not reflect penetration of those folks.
Yeah.
Okay. Thank you.
Thank you. Our next question or comment comes from the line of Andrew <unk> from Credit Suisse. Your line is open.
Hey, good morning.
Interested in a little more clarity around the 18% rate increases that you've got in year to date could you clarify.
Just how does that how do you define that in other words.
Is it a specific state like New Jersey, where you would've gotten 18% or is it a cohort within each state maybe a region.
Certain group could you clarify that 18%.
Yeah, it's a weighted average of the states, where we took rate in so there's some you know we got a wide range. Some states might get five some states might get twenty-five that'd be a weighted average of the states that we took right in that.
Also mentioned that that's that that increase is.
Is not just the base rate increases.
A big thing we did this quarter was we actually rolled out a new rating model, which has greatly increased segmentation. So in minutes to both increase the rates and rollout of new segmentation model at the same time and most of those states IC. So segmentation is part of it but when you do cite 18% it is.
You know if you had new Jersey at 18 in New York It at 'twenty. The average would be 19 in there would be no and then you would also adjust for this new model as well.
You know that the new model the new model loss ratio improvement would be like in addition to that we took we did 18 rate increases and the weighted average of those was 19%.
So across those across those 18 states, we got 19% and that's not not each state gets the same weight right. It would be weighed average by the amount of premium we have in those states.
And to move at that speed with segmentation improvements and truly an entire refitting our entire loss cost models and adding additional segmentation at that speed that's really unprecedented.
So those are some high numbers.
And and and going forward.
Could you give any specific color on your ability to work with regulators how amenable. They are to these rate increases.
Your your process in terms of working with them just just a little color around that would be very helpful.
Sure. So as you probably know it's working with the regulators as a state by state basis, what's allowed how the regulators view it differs by state and it depends on the amount of the rate need and the regulatory environment in each state.
We do feel that we've got opportunity to take more rate and work with the regulators in some states and then there's of course, our tech which gives us the ability to kind of quickly make changes in order to take advantage of where we can take rates.
Got it.
I think it was about two quarters ago, you cited your interest in developing business in the independent insurance agent distribution channel.
Channel could you provide a little color on how that's coming along what kind of traction you're getting.
That are our product there is still alive, we are not actively trying to scale that at this time right now given the current environment and frankly, given the promise that we're seeing right now in the embedded channel we have doubled down there it.
It is still alive, we do believe that we will scale that in the future, but right now we're focused on rate adequacy first.
Awesome. Thanks, so much.
Thank you.
Thank you. Our next question or comment comes from the line of David Motor Muggy from Evercore. Your line is open.
Hi, This is francois on for Dave I'm, just curious your gross accident period loss ratio the 12 point sequential improvement.
How much could you quantify for us how much of that.
The benefit came from seasonality.
Right.
We'd say that some of it seasonality some of it's miles driven some of its rate we don't have a specific breakdown for each one.
Got it thanks.
Thank you.
Thank you I'm showing no additional questions in the queue at this time I'd like to turn the conference back over to management for any closing remarks.
Thank you I, we appreciate the opportunity to address you and look forward to addressing you in future quarters.
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day.
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