Auto insurance startup company Root to cut 20% of its jobs

"To further improve cash flow we are prioritizing resources that support Root's go-forward strategy," Root CEO and co-founder Alex Timm said in a letter to shareholders as part of the company's release of its third-quarter financial results. "As a result, we have made the difficult decision to reduce our headcount by roughly 20%."

The company said 137 jobs were cut this week in this latest round of reductions.

"The most difficult part of this realignment is that we said goodbye to employees throughout the business," the insurer said in a statement. "We are deeply grateful to all Root employees, past and present, for their continued commitment to our vision of disrupting the car insurance industry."

In January, Root eliminated 330 jobs, or about 20% of its workforce then, blaming the pandemic for spiraling costs that drove big losses for the company.

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Beyond head count, Root said it is reducing other expenses as well.

In its report for the three months that ended Sept. 30, Root said it has lowered expenses by $48 million a year and that it expects to further reduce costs by another $50 million. It also said it has cut spending on marketing by $60 million compared with the same period in 2021.

"As we continue to transform the business with an objective to shorten the time horizon to reach profitability, we are narrowing our focus to initiatives that we believe will have a clear and immediate return," Timm said in the letter. "We are utilizing our deep understanding by customer segment and geography to drive profitable new writings through our direct offering with very limited marketing."

Root began operations in 2015 under the premise that machine learning and modern technology could revolutionize the old and stodgy auto-insurance industry.

Drivers download the Root app to their phones and drive as they normally would. The app tracks speed, rapid acceleration, hard stops, swerves and whether drivers are fussing with their phone while behind the wheel.

At one time, various reports pegged the value of the company up to as much as $6 billion, but the insurer's shares have tumbled since it went public two years ago. Today, the company is worth about $100 million.

The company posted a loss of $64 million for the quarter on revenue of $73.7 million. That's down from a loss of $133 million from the 2021 third quarter on revenue of $93.8 million.

Roots cutbacks are the latest in a string of cutbacks from relatively new Columbus-area technology companies, including Olive, Lower.com and Upstart.

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@BizMarkWilliams