0001788882-26-000014
SEC filingRoot, Inc. achieved a full-year net profit in 2025, driven by premium growth and improved underwriting, with net combined ratio at 98.2%.
Root, Inc. describes itself as a technology insurance company founded on the idea that car insurance rates should be based primarily on driving behaviors, not demographics. The company is revolutionizing the car insurance industry by using modern technology, data science, and telematics to offer fair, personalized rates to good drivers. Its primary focus is the United States personal auto insurance market, which it estimates at approximately $350 billion. Root believes this market is ripe for disruption because traditional methods of pooled risk assessment are not personalized and underutilize individual behavioral data.
The Business section does not present formal financial reporting segments. Instead, it describes two primary distribution channels: the direct channel and the partnership channel. The direct channel delivers a seamless, digital-first experience supported by performance marketing and organic traffic, connecting consumers directly to the product. It includes digital, referral, and channel media sub-channels. The partnership channel integrates Root's insurance offering within trusted third-party ecosystems, including automotive & financial services partners and independent agents. No revenue share percentages are disclosed for these channels.
Root's key product is personal auto insurance, distributed through its proprietary technology platform. The company offers a mobile app available for both iOS and Android, making it available to 99% of United States smartphone users. A key component of the underwriting process is the "test drive," a two-to-four week period that gathers and analyzes an individual's data from smartphone sensors measuring braking, consistency, turning, time of day, driver attentiveness, and other performance and contextual data. The company also offers insurance products using traditional underwriting variables for customers with immediate insurance needs. Root operates through three wholly-owned regulated U.S. insurance subsidiaries: Root Insurance Company, Root Property & Casualty Insurance Company, and Root Florida Insurance Company. It also has a wholly-owned Cayman Islands-based reinsurer, Root Reinsurance Company, Ltd. (Root Re), and several licensed insurance producer subsidiaries.
Root reaches customers through two channels: direct and partnership. The direct channel includes digital (performance marketing and organic traffic), referral (compensating existing customers who refer new customers), and channel media (direct mail, social media, and digital media). The partnership channel includes automotive & financial services partners (such as Carvana) and independent agents. The company's customer acquisition costs vary due to channel mix, state, seasonality, or the competitive environment. No single customer concentration is disclosed.
The insurance industry in which Root operates is highly competitive. Primary competitors include large national insurance companies such as GEICO, Progressive, and Allstate, as well as new market entrants in the insurtech industry, some of which also utilize telematics and offer forms of usage-based insurance. The established national insurance companies have increased name recognition, higher financial ratings, greater resources, additional access to capital, and more lines of insurance coverage to offer. Competition is based on factors including reputation, coverages offered, pricing, customer service, claims experiences, size, and financial strength ratings. Root believes it competes favorably across many of these factors and has developed a platform and business model based on behavioral data collection and machine learning that will be difficult for incumbent insurance providers to emulate.
Root's stated strategic priorities are: (1) accurate pricing through improved risk segmentation by increasing the influence of behavioral factors in underwriting and pricing models; (2) enhancing direct marketing efficiency through data science and dynamic bidding and targeting strategies; (3) expanding the partnership network by embedding with prospective strategic partners and investing in the independent agent platform; and (4) growing national auto insurance presence by diversifying distribution channels and launching additional states. The company may also selectively pursue additional investments, acquisitions, and partnerships to accelerate growth or improve competitive positioning.
As of December 31, 2025, Root had 1,256 full-time employees. None of its employees are represented by a labor union or covered by collective bargaining agreements. The company's people strategy is built around four guiding pillars: Customer Value, Experimentation and Innovation, Disciplined Thinking, and Operational Excellence. Root has been recognized as a Great Place to Work by Great Place To Work®.
Root, Inc. reported net income of $40.3 million for the year ended December 31, 2025, a 30.4% increase from $30.9 million in 2024, marking its second consecutive year of full-year profitability. Total revenues grew 29.0% to $1.52 billion, driven by a 30.9% increase in net premiums earned to $1.40 billion. The revenue growth was fueled by an expanding policy base—policies in force rose 16.2% to 481,869—and a strategic reduction in quota share reinsurance, which lowered ceded premiums earned by 59.8%. Net premiums written increased 25.5% to $1.46 billion, outpacing gross premiums written growth of 15.7%.
Despite higher top-line revenue, operating income declined 21.3% to $61.8 million from $78.5 million, as operating expenses grew 32.5%—faster than revenue. The primary drivers were a 93.9% surge in other insurance expense to $206.3 million, reflecting higher partnership commissions, a prior-year sales tax tailwind reversal, and increased Carvana warrant compensation. Sales and marketing rose 28.7% to $174.8 million, driven by higher direct performance and experimental marketing spend. General and administrative expenses increased 39.4% to $96.9 million, largely due to higher share-based compensation. Loss and loss adjustment expenses increased 26.1% to $924.2 million, but the net loss and LAE ratio improved 260 bps to 65.9%, aided by favorable prior-period reserve development.
The net combined ratio deteriorated to 98.2% from 96.4%, as a lower loss ratio was offset by a higher expense ratio (32.3% vs. 27.9%). The gross combined ratio also weakened to 97.1% from 94.7%, driven by an increase in the gross expense ratio (32.0% from 27.2%). Adjusted EBITDA grew 18.0% to $132.0 million, reflecting improved underlying profitability before certain non-operating items.
Root operates through direct and partnership distribution channels. The partnership channel remained the primary catalyst for new customer growth, contributing significantly to the 15.7% increase in gross premiums written. In response, the company increased commissions paid by $35.1 million. The direct channel saw a $26.9 million increase in performance marketing spend as Root invested in deeper penetration in existing states. Premiums per policy declined 3.3% to $1,531, attributed to a shift in customer and geographic mix toward lower-premium segments. The gross accident period loss ratio increased to 59.3% from 58.2%, reflecting higher severity from vehicle repair and medical cost inflation, partially offset by rate actions and favorable weather.
Management did not provide quantitative forward guidance but highlighted strategic priorities: continuing to diversify distribution channels, investing in technology and data science to refine pricing and risk selection, and maintaining a capital-efficient reinsurance structure. They expressed confidence that existing liquidity of $669.3 million in cash and $387.0 million in marketable securities is sufficient to meet working capital and capital expenditure needs for at least the next 12 months. Key risks include inflationary pressures on claims costs, evolving tariff policies, and competitive dynamics in pricing and marketing. The company expects technology and development costs to decrease as a percentage of revenue and general and administrative expenses to decline over time as revenue scales.
As of December 31, 2025, Root, Inc. held $669.3 million in cash and cash equivalents, up from $599.3 million at December 31, 2024. Total investments were $391.4 million, including $387.0 million in available-for-sale fixed maturity securities (amortized cost: $383.1 million) and $4.4 million in other investments. Total assets stood at $1,674.5 million, compared to $1,495.7 million at the prior year-end. Shareholders' equity increased to $284.3 million from $203.7 million, driven by net income of $40.3 million and other comprehensive income of $6.2 million. The company's long-term debt, a $200.0 million Amended Term Loan due October 29, 2030, had a carrying value of $200.3 million (net of $3.0 million unamortized discount and issuance costs) and an estimated fair value of $204.1 million.
As of December 31, 2025, Root had total purchase commitments of $38.6 million, primarily related to data and information technology services. These obligations are scheduled as follows: $11.4 million in 2026, $10.6 million in 2027, $7.6 million in 2028, $3.4 million in 2029, and $5.6 million in 2030 and thereafter. Additionally, the company has operating lease liabilities of $4.3 million (undiscounted future payments of $4.8 million) for office space, with a weighted-average remaining lease term of 2.10 years. Loss and loss adjustment expense reserves totaled $483.6 million gross of reinsurance ($458.2 million net), reflecting the estimated ultimate cost to settle insured losses.
No share repurchases or dividends were declared or paid during the year ended December 31, 2025. The company's capital expenditures consisted of $14.1 million in capitalized internally developed software costs. There were no new debt issuances or repayments during the period; the $200.0 million Amended Term Loan remained outstanding. The company's insurance subsidiaries paid extraordinary dividends of $123.0 million (Root Insurance Company) and $60.0 million (Root Reinsurance Company, Ltd.) to the parent holding company.
Root operates as a single reporting segment managed on a consolidated basis. The chief operating decision maker uses net income (loss) as the primary measure to manage operations. Gross premiums written by state for the year ended December 31, 2025 were: Texas $288.5 million (19.2%), Georgia $182.0 million (12.1%), Florida $128.9 million (8.6%), California $105.6 million (7.0%), Pennsylvania $86.8 million (5.8%), Colorado $76.2 million (5.1%), South Carolina $53.6 million (3.6%), Arizona $49.1 million (3.3%), Nevada $39.9 million (2.6%), Oklahoma $34.5 million (2.2%), and all other states $460.7 million (30.5%).
The provided document excerpt contains only the auditor's report, balance sheets, and other sections, but does not include the Consolidated Statements of Cash Flows. Therefore, no cash flow analysis can be performed.