Root Inc., the parent company of auto insurtech Root Insurance, has become profitable for the first time.
In a letter to shareholders, Root co-founder and chief executive Alex Timm (pictured) stated: “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.”
In the third quarter, Root saw a 57% increase in its policies in force, to 407,313. Gross written premium, meanwhile, rose 48% to $332 million. During the period, the company generated $23 million in net income and operating income of $34 million.
Timm noted: “We posted net income of $23 million, a $69 million improvement year-over-year. We also delivered operating income of $34 million and adjusted EBITDA of $42 million, a $68 million and $61 million improvement year-over-year, respectively. Our consistently strong underwriting drove the improvement, with a gross combined ratio of 89%.
“Our strong results were driven by targeted acquisition investment, loss ratio performance, and the efficiency of our fixed expense base as growth continues. Unencumbered capital at the end of the quarter was $439 million, reflecting minimal quarterly unencumbered cash consumption of $8 million.”
According to the CEO, Root’s “dramatically improved business performance” allowed it to reduce the firm’s cost of capital by refinancing its term loan with BlackRock Capital Investment Advisors.
“As a result of the refinancing, which is subject to other terms and conditions, we expect to lower interest expense on a run rate basis by roughly 50%, which will serve to further accelerate our profitability trajectory,” Timm said.
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