Root has a great business, ticking all the boxes for 3G.
Root was founded on the idea that car insurance rates should be based primarily on driving behaviours, not demographics. We’ve revolutionized the archaic car insurance industry using mobile technology and data science to offer fair, personalized rates to good drivers.
Today, Root is the largest auto insurtech in the country, ranked #1 auto insurtech by premium*, and boasts one of the best loss ratios in the industry.
For the first time in company history, Root reached net income profitability. This milestone, achieved in the third quarter of 2024, is on both a quarter-to- date and year-to-date basis. This is a pivotal moment for Root. This quarter validates the strength of our business model, our technology, and our customer value proposition. We have maintained conviction that our data science and machine learning acumen, our modern technology stack, and our delightful customer experiences would ultimately combine to drive the company to net income profitability. And that’s exactly what happened. Importantly, our momentum does not stop here:
We recently refinanced and reduced our debt. This greatly improves our earnings profile via an approximate 50 percent reduction in interest. Our Partnership channel continues to grow at impressive rates, with new writings from this channel up 131pc year-over-year in the third quarter.
We have continued to grow policies in force gradually in the fourth quarter to date. We continue to post solid and stable loss ratios, even with major weather events. Our gross loss ratio in the third quarter was 57pc, a testament to our data science and machine learning technology. We have built a culture that has forged in us a grit, determination, and focus to relentlessly execute and never be
Root Inc, Shareholders’ Letter, Q3 2024, 30 October 2024
complacent. We believe that this culture will continue to serve us well
If you are technically minded the following slides may be of interest. They show a business with rapidly improving metrics.
LAE stands for Loss Adjustment Expense, which is the cost an insurance company incurs to investigate, manage, and settle insurance claims. It’s also known as “claims adjustment expense”.
LAE is a vital part of an insurance company’s operations and directly impacts its profitability and financial performance. It helps insurance companies determine the legitimacy of a claim, the extent of their liability, and the validity of the loss. LAE also helps insurance companies reach fair settlement agreements with policyholders.
Just Getting Started
While this quarter certainly validated our conviction, we are just getting started. With a strong capital position and ability to drive profit, we are excited to increasingly focus on profitable growth. We will continue to invest our profits into the business to drive long term value creation, which will naturally increase our operating expenses in the near term. Our technology has unlocked a strong customer value proposition that we believe is differentiated in the market, difficult to replicate, and readily scalable. As a result, we believe our partners and customers alike will continue to benefit from our attractive prices, easy integrations, and great customer experiences.
Root Inc, Shareholders’ Letter, Q3 2024, 30 October 2024
Share Recommendations (1 December 2024)
Root Inc. ROOT
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