Root, Inc. — Q3 2026 Earnings Summary

Financial Performance:

• Generated $381 million in revenue for the quarter, down from $388 million in the prior-year period.
• Reported net income of $14 million, compared to a net loss of $5 million in the prior-year period.
• Adjusted EBITDA was $34 million, broadly consistent with the prior-year period.
• Achieved approximately 18% annualized return on equity.
• Gross written premium was $358 million, down 8% year-over-year; gross earned premium was $356 million, down 5% year-over-year.
• Net premiums earned were $352.8 million.
• Net combined ratio was 97.2%, an improvement of 4.9 percentage points year-over-year.
• Gross accident period loss ratio was 61.1%, within the long-term target range of 60% to 65%.
• Net loss and LAE ratio was 66.2%; net expense ratio was 31.0%.
• Gross loss ratio was 58.0%; gross expense ratio was 30.8%.
• Gross profit was $87.7 million.
• Direct contribution was $119.9 million.
• Policies in force ended the quarter at 484,000, up 4% year-over-year and broadly stable sequentially.
• Premiums per policy were $1,441.
• Total assets were $1,669.9 million as of September 30, 2026, compared to $1,674.5 million as of December 31, 2025.
• Long-term debt was $197.5 million as of September 30, 2026, down from $200.3 million as of December 31, 2025.
• Cash and cash equivalents were $596.3 million as of September 30, 2026.
• Net cash provided by operating activities was $114.1 million for the nine months ended September 30, 2026.
• Net cash used in investing activities was $80.0 million for the nine months ended September 30, 2026.
• Net cash used in financing activities was $52.4 million for the nine months ended September 30, 2026.

Guidance and Future Outlook:

• The company expects to enter a next phase of profitable growth driven by strategic investments in products, technology, and distribution.
• Management aims to build the largest and most profitable personal lines insurance carrier in the United States.
• The latest proprietary pricing model, completed in Q3, is expected to deliver the largest improvement in predictive power to date and will be deployed in the fourth quarter.
• Future growth is anticipated to be driven by five reinforcing levers: more sophisticated pricing, broader Direct reach through state expansion, scaled embedded partnerships, growing independent agent distribution, and new products and shopping experiences.
• The company intends to maintain underwriting and capital discipline, not chasing growth for its own sake but focusing on compounding profitable growth.
• Management cannot control when market conditions will shift but aims to ensure Root is prepared when they do.

Business Segments and Product Lines:

• Partnership new writings grew 19% year-over-year and represented 52% of total new writings, up from 44% in the prior-year period.
• The Direct channel saw intentional trading off of incremental policy growth when expected returns fell below thresholds due to competitive pressures.
• Renewed and extended the commercial relationship with Carvana through August 2028; over 250,000 Root policies have been written through Carvana since September 2022.
• Launched the Hyundai Secure+ Powered by Root pilot in 14 Phoenix-area dealerships, offering six months of free insurance to eligible customers purchasing or leasing a new Hyundai.
• Expanded into Wyoming in October, bringing operations to 38 states and reaching approximately 82% of the U.S. population.
• Completed development of the latest proprietary pricing model to improve segmentation and customer lifetime value.
• Renters insurance is available through Root Insurance Company in Arkansas, Georgia, Kentucky, Missouri, Nevada, New Mexico, Ohio, Tennessee, and Utah.
• In Texas, business is underwritten by Redpoint County Mutual Insurance Company as a Managing General Agent.

Market and Competitive Landscape:

• Personal auto competition intensified during the quarter as large carriers increased marketing, broadened underwriting appetite, lowered average premiums, and competed more aggressively for growth.
• The market is cyclical, and the company views capital discipline as a prerequisite for compounding value.
• Agentic commerce and connected-vehicle experiences are emerging as new ways for customers to discover, buy, and use insurance.
• Root's API-based architecture allows for quick integration into digital shopping environments.
• The company believes shifting shopping dynamics favor carriers that deliver the best price, coverage, and experience over those relying on broad brand spending or bundled relationships.

Risks and Challenges:

• Intense competition from large carriers lowering premiums and increasing marketing spend.
• Inability to control when market conditions or competitive conditions will shift.
• Risks associated with the accuracy and efficiency of telematics and behavioral data.
• Potential regulatory changes regarding the use of AI, telematics data, and connected-car data.
• Risks related to capital requirements if reinsurance utilization is reduced.
• Potential impacts from geopolitical instability, supply chain disruptions, inflation, tariffs, and interest rate changes.
• Cybersecurity threats and potential disruptions to technology systems.
• Risks related to litigation, legal fees, and the misappropriation of funds by former employees.

Management Commentary and Tone:

• CEO Alex Timm emphasized that discipline does not mean standing still, but rather provides the financial strength to continue investing in products and capabilities for durable long-term growth.
• Management stated they are "not chasing growth for its own sake" but are building pricing, products, and distribution to compound profitable growth.
• The tone reflected confidence in the company's technology and pricing model, noting that third-quarter profitability demonstrated the underlying earnings power of the business.
• Management highlighted the value of embedded insurance to customers and partners, citing the Carvana renewal and Hyundai pilot as examples of fitting insurance naturally into the vehicle ownership journey.
• The company views its integrated insurance system, which operates end-to-end through AI and automation, as a durable competitive advantage.

Other Key Points:

• Repurchased $36.2 million of Root shares during the third quarter, excluding transaction costs, under a $75 million share repurchase authorization.
• The company has roughly 19 million app downloads and has collected 38 billion miles of driving data.
• Root is a technology company built to automate insurance end-to-end, owning systems for customer acquisition, pricing, underwriting, policy issuance, and claims routing.
• The company is actively adapting its Direct quote experience for emerging agentic tools.
• Non-GAAP financial measures used include Direct Contribution and Adjusted EBITDA.
• The company operates under Root Insurance Company and Root Property & Casualty Insurance Company, with specific underwriting arrangements in Texas.