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Date
Wednesday, November 5, 2025 at 5 p.m. ET
Call participants
Co-Founder and Chief Executive Officer — Alexander Timm
Vice President, Finance — Matthew LaMalva
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Takeaways
Net Loss -- $5 million, primarily due to a $17 million non-cash warrant expense related to the Carvana partnership, including a $15.5 million cumulative catch-up.
Operating Income -- $300,000, reflecting improvement in core operations while absorbing non-cash warrant costs.
Adjusted EBITDA (non-GAAP) -- $34 million, demonstrating profitability on an adjusted basis despite one-time items.
Year-to-Date Net Income -- $35 million after factoring in the Carvana warrant expense.
Policies in Force -- Achieved a record level, with double-digit percentage growth year over year across both direct and partnership channels.
Written Premium and Earned Premium -- Both posted double-digit percentage increases year over year, indicating accelerating top-line momentum.
Gross Accident Period Loss Ratio -- 59%, remaining below management’s 60%-65% target range.
Average Premium per Policy -- Decreased sequentially, mainly due to a double-digit rate reduction in Florida, a major market for Root, Inc.
Partnership Channel Expansion -- New writings more than doubled in the partnership channel and more than tripled year over year via independent agents, now representing 50% of partnership distribution.
Direct Channel Growth -- New writings increased sequentially by high single digits, showing continued resilience despite higher competition.
Pricing Algorithm Impact -- CEO Timm said, “our newest pricing algorithm in the quarter, which is improving customer LTVs by 20% on average.”
UVI Model Launch -- Deployed a new underwriting variable importance model, which management estimates has improved predictive power by 10%.
Unencumbered Capital -- $39 million at period end, positioning the company to fund profitable growth initiatives.
Loss Severity -- Up 9%, driven more by property damage (vehicle collisions) than medical coverages, but described as within normal variation and not requiring major rate changes.
Seasonality Guidance -- Management anticipates a headwind to loss ratio in the fourth quarter due to elevated animal collisions and bad weather, comparable to the five percentage-point impact seen last year.
R&D Marketing Investment -- Direct investment to increase by roughly $5 million in the upcoming quarter in support of growth priorities.
Independent Agent Penetration -- Root, Inc. grew participation from less than 4% of agents in recent quarters to less than 10% nationally, maintaining rapid onboarding plans.
Summary
Root, Inc. (ROOT 8.62%) accelerated double-digit growth across key metrics while maintaining its gross accident period loss ratio below target. The company attributed improved customer economics to its newly launched pricing algorithm and an advanced UVI model. Notably, new writings in the partnership channel surged, with independent agents now accounting for half of that channel’s volume. Management confirmed expanding competitive intensity, but cited ongoing sequential growth in both direct and partnership distribution. Year-to-date profitability was preserved despite a major non-cash Carvana warrant expense, and $39 million in unencumbered capital was reported to fund further growth efforts.
Matthew LaMalva stated, “our net loss in the quarter was primarily driven by a $17 million non-cash expense related to our warrant structure with Carvana.”
CEO Timm stated October PIF growth “has definitely accelerated what you saw in Q3,” reinforcing positive momentum into the current quarter.
Timm indicated Root, Inc. remains “broadly rate adequate,” signaling no material pricing action is anticipated due to recent loss severity trends.
Management expects partnership channels to represent an increasing share of Root, Inc.'s business, primarily due to higher average premiums and a more rapid scaling trajectory among independent agents.
Industry glossary
Policies in Force (PIF): The total number of active insurance policies held by customers at a specific point in time.
Gross Accident Period Loss Ratio: A metric representing incurred losses as a percentage of earned premiums for claims occurring within the current accident period, before ceded reinsurance effects.
UVI Model: Underwriting Variable Importance model, a proprietary predictive analytics framework used to enhance pricing, risk selection, and loss estimation.
Full Conference Call Transcript
Matthew LaMalva: Root is hosting this call to discuss its third quarter 2025 earnings results. Participating on today's call is Alexander Timm, Co-Founder and Chief Executive Officer. Megan Nicole Binkley, our Chief Financial Officer, will be unable to join us this afternoon due to a family medical matter. In her absence, I will be providing our financial results and will also be available for Q&A. Earlier today, Root issued a shareholder letter announcing its financial results. While this call will reflect items discussed within that document, for more complete information about our financial performance, we also encourage you to read our third quarter 2025 Form 10-Q, which was filed with the Securities and Exchange Commission earlier today.
Before we begin, I want to remind you that matters discussed on today's call will include forward-looking statements related to our operating performance, financial goals, and business outlook, which are based on management's current beliefs and assumptions. Please note that these forward-looking statements reflect our opinions as of the date of this call, and we are not obligated to revise this information as a result of new developments that may occur. Forward-looking statements are subject to various risks, uncertainties, and other factors that could cause our actual results to differ materially from those expected and described today. For a more detailed description of our risk factors, please review our most recent 10-Ks, 10-Q, and shareholder letter.
A replay of this conference call will be available on our website under the Investor Relations section. I would also like to remind you that during the call, we will use some non-GAAP measures while talking about Root's performance. You can find reconciliations of these historical measures to the nearest comparable GAAP measures in our financial disclosures, all of which are posted on our website at ir.joinroot.com. I will now turn the call over to Alexander Timm, Root's Co-Founder and CEO.
Alexander Timm: Thanks, Matt. The third quarter was another very strong quarter for Root, and we are excited by the momentum we are building. It was a record quarter for policies in force and revenue, driven by accelerating growth in both direct and partnership distribution channels. We achieved this growth while maintaining our exceptional loss ratio performance. As a technology company, we believe we have a structural and durable competitive advantage. This DNA is evident in everything we do, from our customer obsession to our pricing technology to the people we hire.
It is what makes us special, and you saw that come through in the quarter across our pricing algorithm innovations, our partnership platform expansion, and our direct marketing machine, all combining to generate exceptional performance. As one example, we deployed our newest pricing algorithm in the quarter, which is improving customer LTVs by 20% on average. This model allowed us to accelerate growth across all channels. And we are not stopping there. In the quarter, we also launched our new UVI model, which we estimate has improved predictive power by 10%. We believe this speed of innovation is unmatched in the industry, and we have no plans of slowing down.
Also in the quarter, you saw our growth strategy at work, more than doubling new writings in our partnership channel, launching Washington State, and launching several experiments in new marketing channels. In our partnerships channel, we are extending our competitive advantage that provides seamless, easy purchase experiences with great prices to customers no matter how or where they shop. This represents a vast growth opportunity. Today, Root is only active in a very small fraction of distribution points in the insurance shopping ecosystem. This opportunity was on display in the quarter, as we more than tripled our new writings year over year from independent agents, which now represents 50% of our partnership distribution.
This channel alone is over a $100 billion in premium nationally. And although we have made great strides, we are still active in less than 10% of agents, giving us a long and natural runway to rapidly expand our presence in this space. In our direct channel, new writings increased sequentially by high single digits despite increased competition. Combined with our new pricing model, we continue to invest in new real-time bidding algorithms that allow us to optimize for anticipated long-term economics. This machine continues to detect trends and changes in the marketplace and dynamically deploys our investments. We have also begun to see green shoots in a handful of new marketing channels, a focus of our R&D efforts.
We plan to continue to accelerate our investments in these channels given our recent successes and react appropriately as the data emerges. Our success makes us excited and confident to invest further into the business to accelerate our pricing advantage, increase our distribution presence across channels and geographies, and continue to create experiences customers love through product innovation. With a healthy capital position, excellent underwriting results, and a culture of discipline and excellence, we are ideally positioned to accelerate our growth trajectory. Our goal remains to build the largest, most profitable personal lines insurance carrier in the United States, and this quarter represents marked progress toward that goal.
I'll now turn the call back over to Matt for more details on the quarter.
Matthew LaMalva: Thanks, Alex. For the third quarter, we recorded a net loss of $5 million, operating income of $300,000, and adjusted EBITDA of $34 million. As previously communicated, our net loss in the quarter was primarily driven by a $17 million non-cash expense related to our warrant structure with Carvana. Of this $17 million, $15.5 million reflects a cumulative expense catch-up. This expense ultimately reflects the success of our partnership, as the vesting of warrants depends on achieving policy origination milestones. Even with this expense taken into account, we have generated $35 million of net income on a year-to-date basis. In the third quarter, we accelerated growth while continuing to achieve our target unit economics.
Year over year, we delivered double-digit percentage increases in policies in force, written premium, and earned premium, while achieving a 59% gross accident period loss ratio. These strong results were driven by the deployment of our latest pricing model, advancements in our real-time bidding algorithm, and expanded partner integrations. Our capital position remains strong, with unencumbered capital of $39 million at the end of the third quarter. Given our exceptional underwriting performance, we also continue to be in a position of excess capital across our insurance subsidiaries. This allows us to optimize our operating structure and deploy growth capital to the highest profit-yielding opportunities.
We continue to take a disciplined and opportunistic approach to direct marketing investment, adjusting quarter by quarter based on prevailing competitive dynamics. On the partnership side, we are still early in scaling this channel, and we expect it to continue to increase as a percentage of our overall book over the long term. Looking ahead, we expect continued acceleration of policies in force growth, and are excited to support that growth by increasing our investment in direct R&D marketing by roughly $5 million in the fourth quarter. Further, we anticipate a headwind to our loss ratio from typical seasonality in the fourth quarter, which is driven by elevated animal collisions and bad weather.
Last year, the impact of the seasonality was roughly five percentage points of the accident period loss ratio, and we expect a similar impact this year. As we close out 2025 with exceptional underwriting performance, a healthy capital position, and a strong culture, we are now focused on accelerating growth at our target unit economics. Put simply, we are optimistic that our superior technology will drive growth despite an increasingly competitive environment. We are just getting started. With that, Alex and I look forward to your questions. Thank you.
Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from Andrew Andersen with Jefferies LLC. You may proceed with your question.
Andrew Andersen: Hey. Good afternoon. Sounds like some opportunities in the direct channel this quarter with some new writings increasing sequentially, high single digits. Maybe you could just talk about how that opportunity came to be and just the overall level of competitiveness you are seeing on the direct channel?
Matthew LaMalva: Yeah. Thanks for the question. Yeah. We are still seeing competition up in the quarter and in the channel. But really, what has happened, and we have continued actually to see that even this quarter to date, a continued acceleration of new writings and growth. In our direct channel, in our partnerships channel, and really every channel overall. And a big thing that's driving that is our price. You know, last quarter, we detailed that we shipped a new pricing algorithm that improved customer LTVs by 20%. That unlocks a lot of opportunity for us to continue to grow.
And as we do that and we continue to refine pricing, continue to collect data, and continue to get better at it, you are going to continue to see us be able to grow, just despite increased competitive pressures, and that's exactly what you saw this quarter. And, you know, we are still seeing that quarter to date as well.
Andrew Andersen: Thanks. And then on the severity number, plus 9%, it seems to have ticked up a little bit after kind of some sixes and sevens in recent periods. Can you maybe just talk about the change that you saw in severity this quarter and if it requires any change to rate here?
Alexander Timm: We are not anticipating any major changes to rate gonna be we are broadly rate adequate. There will be some maintenance rate that we take here and there. I think the increase that you saw in the quarter is well within sort of natural variation for those numbers. We did see it a little bit more in property damage line, so in vehicle collisions, versus our medical coverages. But, you know, again, I think that it was well within the normal range of variation. Thank you.
Operator: Our next question comes from Thomas Patrick McJoynt-Griffith with KBW. You may proceed with your question.
Thomas Patrick McJoynt-Griffith: Hey, guys. Can you hear me?
Alexander Timm: Yeah. We can hear you.
Thomas Patrick McJoynt-Griffith: Awesome. Thank you so much. You mentioned being active with less than 10% of independent agents. Can you just give us some color on how that figure is trended over the last couple of years? So we can get a sense of the trajectory of your penetration? And then what's the process to go live with more agents?
Alexander Timm: Absolutely. You know, independent agents have been one of the most attractive near-term growth levers we've actually seen in the business. And we just are getting started. You know, we really just launched a couple of years ago, significant into independent agents. And, you know, last quarter, I believe we had disclosed that we were in, you know, less than 4% of all agents nationally. And so it represents, you know, it's a third of the market still. Was a third of the market a decade ago. It was a third of the market a hundred years ago. So, you know, we don't think the independent agents channel is going anywhere.
And we're, again, we're just barely dipping our toe in. And so as we continue to grow that, you know, we grew at three times year over year this quarter. And we're not seeing that slow down. So we are marketing to agents, we're actively onboarding more agents, we are continuing to improve the product for agents so that they have more servicing capabilities, better prices for their customers as well. So, you know, we're seeing that as a really attractive growth channel, and we don't have any plans to slow down on appointing agents.
Thomas Patrick McJoynt-Griffith: Thank you so much. And then my second question is just that you give us the partnership as a percentage of new writings in the quarter. But if we wanted to think about partnership as a percentage of earned premium, could we take a trailing twelve-month average?
Matthew LaMalva: So this quarter, you saw roughly flat partnership percentage as an overall new writings, and that's because both of our channels grew very strongly. Still continuing, as Alex mentioned, see very strong growth in partnership driven by IA. We have the pricing model that we launched last quarter, which tends to be the tide that lifts all ships. We are seeing very strong growth there. But when we look over sort of the medium to longer term, we do expect partnership to continue to grow and continue to be an increasing proportion of our book over time.
Alexander Timm: And as a matter of earned premium, you know, you're probably gonna see you see higher, average premiums in the partnership channel. They're just larger policies that come through because there's more vehicles per household in that channel, particularly in the independent agency channel where a lot of preferred business shops. And so I think you're gonna see a little bit more it'll be a little bit more skewed towards earned premium than sort of a trailing twelve-month average.
Thomas Patrick McJoynt-Griffith: Great. Thank you.
Operator: Our next question comes from Hristian Getsov with Wells Fargo. You may proceed with your question.
Hristian Getsov: Hi. Good afternoon. My first question is on the average premium per policy. It actually went down quarter over quarter, and I was trying to get a sense of how much was that driven by that new pricing model. And then given you continue to trend well below the 60 to 65 target loss ratio, do you have more flexibility to maybe give up a little bit more on price to continue to win in this environment? Thank you.
Alexander Timm: First, on average premium, you saw us, I believe it was in June, take a fairly sizable rate decrease at the order of, like, a double it was double-digit rate in Florida. And Florida is a very big market. You know, you saw that, you know, some folks had to do some refunds in Florida. We really wanted to make sure that we were giving the right prices to customers upfront, and so we took that rate decrease proactively. And that's why you have seen sort of those average premiums come down, which has actually put us in a really good position for the end of the year.
The ability to give more price back or to potentially lower prices, we're not in the position right now where we're broadly lowering rates, believing that we're overpriced. But we really do see, you know, a continued very healthy loss ratio. And what that's allowing us to do is to just continue to grow faster. And that's what we saw in this quarter. And, again, we've seen that quarter to date as well.
Hristian Getsov: Got it. And then for my follow-up, any changes in the competitive landscape obviously remains elevated, but have you noticed anything, I guess, any recent changes? And then do you have any color on how October PIFF has trended versus the Q3?
Alexander Timm: Yeah. October PIF growth has definitely accelerated what you saw in Q3. And, again, we're not seeing that slow down. And so we feel good there. The competitive environment, it's still very competitive. You are seeing lower rate lower pace of rate increases in the market right now. You're also seeing continued high levels of marketing advertising. And so, you know, on the direct channel specifically, you are seeing high degrees of competition. But again, we saw that in Q3. And I think now we've been able to show that we can even grow and we can execute through that cycle.
And that's really driven by our technology and our new pricing models that are continuing to allow us to grow despite the fact that competition is about as hot as we've ever seen.
Hristian Getsov: Got it. And if I can sneak one more in. Obviously, tariffs were a topic of discussion at the start of the year, and now it's kind of dwindled down. And I think people are maybe expecting less of an impact than they originally thought. I guess, have you guys seen any meaningful change in your data, and has your expectation for those impacts changed?
Alexander Timm: We have not. We've not seen that come through yet. Right now, it still looks like our expectations are basically right in line with what we did expect just from natural trend. And so we don't think that we're seeing any sort of impact to inflation in the data and or in the numbers right now from tariffs. We do expect to see loss ratios generally increase in Q4. There's seasonality, and that's usually, you know, if you look at 2024, you know, you can see that's three to five points. So we might see some temporary increases in loss ratios in the fourth quarter, we don't think that's gonna be driven by tariffs.
Hristian Getsov: Got it. Thank you so much.
Operator: Ladies and gentlemen, this now concludes our question and answer session. And does conclude today's teleconference as well. Thank you for your participation. Please disconnect your lines, have a wonderful day.