Image source: The Motley Fool.
DATE
Feb. 25, 2026 at 5 p.m. ET
CALL PARTICIPANTS
- Co-Founder and Chief Executive Officer — Alexander Timm
- Senior Vice President of Business Development — Jason Shapiro
- Chief Financial Officer — Megan Binkley
TAKEAWAYS
- Revenue Growth -- 29% growth, positioning Root (ROOT 5.09%) at what management described as "the strongest position in the company's history."
- Net Income -- Increased by 30% for the full year, reaching $40 million, up $9 million year over year.
- Gross Written Premium -- Rose by 1,619% for the year, signaling a sharp scale in premium generation.
- Policies-in-Force Growth -- Doubled the pace of 2024, with management announcing "accelerated" growth.
- Operating Income -- $62 million for the year, which decreased from $79 million the previous year, reflecting growth investments.
- Adjusted EBITDA -- $132 million for the year, up from $112 million in 2024.
- Q4 Gross Written and Earned Premium -- Increased by 914% year over year in the quarter.
- Q4 Net Income -- $5 million, down $17 million from the prior year quarter.
- Capital Position -- Ended with $312 million in unencumbered capital, described as "excess" across subsidiaries.
- Loss Ratio Expectation for 2026 -- Targeted to remain within long-term range of 60%-65%, though higher than prior year.
- Partnership Channel Growth -- Approached half of overall new writings in the fourth quarter, achieving profitability and loss ratio targets.
- Agent Channel Expansion -- Integration with Goosehead cut quote-to-bind time by over 50%; independent agents remain the fastest-growing segment.
- OEM Partnership -- New collaboration gives connected Toyota and Lexus vehicle owners instant, telematics-based quotes via data consent.
- Geographic Reach -- Coverage in 36 states, reaching about 80% of the U.S. population, with a stated goal to be in all contiguous states by 2027.
- Technology Advantage -- AI-driven pricing improvements led to average LTV increases of over 20% in the last twelve months.
Need a quote from a Motley Fool analyst? Email [email protected]
RISKS
- Full-year 2026 net income is expected to be lower due to increased investment in distribution, product, and technology, combined with a higher loss ratio, though still within the 60%-65% target range.
- Q4 net income and operating metrics declined year over year, with the CFO citing "deliberate investments in partnership acquisition and direct R&D marketing, as well as a modest increase in loss ratio due to elevated seasonality."
- Management signaled less pronounced year-over-year growth in 2026, noting that the prior year benefited from "increased vehicle sales in response to tariff uncertainty."
SUMMARY
Management emphasized Root's record-setting financial performance and capital strength, underpinned by rapid expansion of its technology-driven insurance and distribution infrastructure. The company reported exceptional premium growth and improved LTVs through AI and quantitative methods, while securing major new embedded and OEM partnerships, notably with Toyota. Strategic investments in R&D and expanded distribution are expected to temper net income growth and modestly increase the loss ratio in the coming year, as Root prioritizes market share and foundational scalability over short-term profitability.
- Embedded insurance through partnerships and APIs contributed to nearly half of new writings in the fourth quarter, with ongoing expansion into automotive and financial service channels.
- The agent channel is highlighted as the fastest-growing business vertical, leveraging workflow-enhancing technology to drive meaningful productivity and retention gains for partners.
- Root plans continued investment in data science, product expansion, and geographic coverage to reinforce its competitive advantage and position for large-scale future growth.
- Management anticipates sequential PIF growth in the near term, attributing shopping surges to seasonal factors like tax refund season.
INDUSTRY GLOSSARY
- PIF (Policies-in-Force): The total number of active insurance policies at a given point in time, a core growth measure for insurance carriers.
- OEM (Original Equipment Manufacturer) Partnership: Collaboration with vehicle manufacturers like Toyota or Hyundai to integrate insurance offerings at point of sale or vehicle operation using in-vehicle data.
- Telematics: Technology that collects and transmits driving behavior and vehicle usage data to inform personalized pricing in auto insurance.
- Loss Ratio: The percentage of premiums paid out in claims, a fundamental measure of underwriting profitability in insurance.
- LTV (Lifetime Value): The total predicted value a customer will generate over their relationship with the company.
Full Conference Call Transcript
Matthew LaMalva: Good afternoon, and thank you for joining us. Root, Inc. is hosting this call to discuss its fourth quarter and full-year 2025 earnings results. Participating on today's call is Alexander Timm, Co-Founder and Chief Executive Officer; Jason Shapiro, Senior Vice President of Business Development; and Megan Binkley, Chief Financial Officer. Earlier today, Root, Inc. issued a shareholder letter announcing its financial results. While this call will reflect items within that document, for more complete information about our financial performance, we also encourage you to read our full-year 2025 Form 10-Ks.
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 key performance indicators and risk factors, please review our most recent 10-Ks 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 discuss some non-GAAP measures while talking about Root, Inc.’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. Thanks, Matt. 2025 was another strong year for Root, Inc.
Alexander Timm: We grew revenue by 29% and our net income by 30%, exiting the year in the strongest position in the company's history. These are standout results in any year, but particularly in 2025. This is a testament to the strong foundation that Root, Inc. has built to deliver throughout cycles. With $1.5 billion in premiums, exceptional financial performance, and a strong balance sheet, we have put in the hard work, time, and investment to be in the enviable position to drive profitable and material growth in our business, and we are doing this in a $350 billion auto market.
Furthermore, our technology has given us a structural advantage and positioned us since our founding to lead in the adoption of AI-driven pricing and automation. As a company whose founding principles lie at the heart of AI, namely the advancements of modern quantitative methods, we are able to take advantage of an increasingly connected world, and we are seeing this come through the numbers. In the last twelve months, we increased our LTVs by more than 20% on average by just doing better math. But we believe that automation via robotic process automation and chatbots will be important to our operating leverage.
Our data suggests that this opportunity pales in comparison to the relative enormity of leveraging next-generation quantitative machines to the fundamental problem of insurance. That is prediction. And our technology advantage does not end there. As technology and consumer behavior rapidly shifts and expectations rise, insurance distribution is now increasingly a technology problem. In the past, distribution first relied on appointing the right exclusive agents in local areas. Then, as the direct channel grew, it moved to inundating customers with ads. Today, whether it is integrating with new consumer-facing GPTs, financial services apps, or vehicles, we believe the future of distribution will be the ability to seamlessly integrate with these services to provide easy, almost invisible insurance.
Doing this with flexible and transparent underwriting, so that there is no dilemma between ease and profit, is fundamentally a technology and data science capability—an opportunity that Root, Inc. was built for. I would like to share our growth strategy that consists of five key growth levers. The first is pricing. The continued rapid iteration of our pricing models as we incorporate new data from a variety of sources ranging from cell phone sensors to in-app behaviors to traditional underwriting variables enables lower prices while maintaining our strong loss ratio performance. This drives material and compounding growth across all of our channels.
Price is the most important factor in insurance, and ultimately, as we lower prices, consumers in all our channels benefit. We are constantly working to make our product more affordable for our customers. The second is geographic expansion. We are already covering 80% of the U.S. population, and our goal is to be in all contiguous states by 2027. There is no reason our model does not scale to these folks in these new states, as consumers everywhere want affordable, easy, transparent, and fair insurance. The third is independent agents. This is our fastest-growing segment with a total addressable market of over $100 billion and growing.
Our seamless agent purchasing experience and competitive pricing makes for a formidable product that is not easily replicated. The fourth is our connected technology ecosystem. A prime example of this opportunity is the recently announced partnership with Toyota that enables consenting drivers to receive an instant telematics-based car insurance quote from Root, Inc. Jason will go into more details on this exciting partnership on today's call. And our fifth lever is our direct distribution machine. Built on a modern data science architecture, our integrated pricing and marketing machines use hundreds of behavioral variables to target the right customers with the right price, adapt quickly to change, and deploy capital with agility and discipline.
We are continuing to expand the scope of this machine as we enter into more data-rich channels, providing new veins of growth for the business. This growth strategy, we believe, is self-reinforcing, creating compounded effects when successful. For example, as pricing gets better, our performance improves, and as a regulated insurance carrier, this performance is critical to our state expansion. As we become national, this in turn makes us more attractive to large partners, and we begin to see economies of scale in our direct distribution. This is a virtuous growth cycle that has been unlocked by our scale and net income profitability. In 2026, we expect accelerating annual PIF growth fueled by continued expansion of our distribution channels.
We also expect to continue investing in the talent and technology to support our growth. Given our clear market opportunity, proven business model, and track record of execution, these investments represent a significant long-term opportunity. We operate with a long-term mindset, prioritizing durable value over short-term reporting results. That means thoughtfully balancing growth and profitability as market conditions shift and we invest in R&D, all while staying focused on the compounding strength of our model rather than quarterly fluctuations. Taken together, we believe this approach positions Root, Inc. to become one of the defining insurance companies of the next decade. I will now turn the call over to Jason to talk about our exciting partnership results.
Jason Shapiro: Thanks, Alexander. I would like to spend a few minutes on our partnerships channel—what we have built, why it matters, and why we believe it represents a durable competitive advantage for Root, Inc. Over the past two years, we have built a partnerships business that was nearly half of overall new writings in the fourth quarter and is achieving our profitability and loss ratio target. That growth has been delivered. It is a result of a focused strategy to diversify distribution and solve what we believe is fundamentally a technology problem inside the insurance industry. For years, the idea of embedded insurance has been promised in the industry.
The idea is simple: meet customers where they are and make insurance easy. But in practice, much of the industry stopped at surface-level integrations—public APIs, referral links, or marketing announcements labeled as partnerships. That is not what we mean when we say Root, Inc. is in the partnerships business. A true partnership requires a shared vision, deep technical integration, aligned incentives, ongoing optimization, and measurable impact for both companies and their customers. It requires scale, regulatory breadth, and a modern technology stack capable of solving real operational complexity. That is where Root, Inc. is differentiated. We operate in 36 states, representing roughly 80% of the U.S. population.
We have a full-stack digital platform with a comprehensive suite of APIs that enable quoting, underwriting, binding, servicing, and telematics, all configurable to a partner's native environment. That combination of scale plus modern infrastructure is rare in our industry and extremely difficult to replicate. Let me give you a few examples. With Carvana, we are deeply embedded in their purchase flow. Customers can quote and buy insurance in three clicks and as little as 30 seconds without ever leaving the Carvana experience. This is not a static integration. Four years into the partnership, we continue to run joint experiments, optimize attach rates, and improve conversion. We are aligned on increasing vehicle transactions and delivering a better customer experience.
That is what true partnership looks like. In the independent agent channel, our integration with Goosehead has reduced quote-to-bind time by more than 50%. Our APIs are deployed directly inside their native agent platform, reducing keystrokes and friction. For agents, that means more productivity. For customers, it means faster service. And for Root, Inc., it means profitable growth in a channel that represents roughly one-third of the auto insurance market. The independent agent channel has become one of our fastest-growing verticals because we are not simply adding another carrier option. We are delivering technology that materially improves the agent workflow. We support agents across the spectrum—from fully embedded API integrations to our hosted experience and Root Agent Portal.
The strategy is simple: meet partners where they are, and grow deeper over time. In automotive and financial services, the opportunity is even larger. Our OEM partnerships, including Hyundai and Toyota, demonstrate another level of differentiation. Through our connected vehicle relationships with major manufacturers, we can access vehicle data directly, enabling telematics-based pricing immediately at policy inception. That shortens time to bind, enhances underwriting precision, and increases customer retention. We are incredibly excited to announce that in the fourth quarter, owners of connected Toyota vehicles can provide consent to share their vehicle driving data with Root, Inc. through our platform.
This data partnership with Connected Analytics Services allows eligible Toyota and Lexus vehicle owners to opt in to receive an instant telematics-based quote on a voluntary basis using their own connected car data. The same model applies in financial services. Through partnerships with financial partners like Experian, we are embedding insurance into high-intent financial moments—credit monitoring and personal financial management. These are ecosystems where consumers are already making important financial decisions. Our platform allows us to integrate in varying levels of depth, from API-driven quoting experiences within partner environments to streamlined transitions into a Root-hosted bind flow. As partners see performance and customer value, we have the ability to expand and further embed over time. That flexibility is critical.
Many large financial institutions are not ready on day one for a fully native insurance stack. Root, Inc.’s platform architecture allows us to start with a lighter integration and progressively deepen it without rebuilding infrastructure. That adaptability is a significant competitive advantage when working with large organizations. Alexander mentioned our hard-won foundation—our geographic footprint, balance sheet strength, regulatory infrastructure, and technical depth—to support these partners in a meaningful way. Having this foundation in place and technology makes Root, Inc. an n-of-one. We believe we are in the Goldilocks zone.
We have both the technical abilities to move quickly and deliver customized solutions, and we have the geographic reach and financial performance needed for Fortune 500 companies to feel comfortable partnering with us. The result is a diversified distribution engine that is not dependent on advertising spend alone. It is a capital-efficient growth model built on long-term, mutually beneficial relationships. Most importantly, it allows us to delight partners while also building better customer experiences at better prices. We are still early. Auto insurance is a $350 billion market in the U.S., and independent agents alone represent roughly a third of that market. Our penetration across automotive, financial services, and independent agents remains small relative to the total opportunity.
But the momentum is real. The integrations are deepening, and the contribution to near-term growth is accelerating. More importantly, we built a technical and strategic foundation to continue compounding that growth, and we believe that is a competitive advantage that will endure. I will now turn the call over to Megan.
Megan Binkley: Thanks, Jason. Turning to financial performance. We concluded 2025 with exceptional underwriting, a strong capital position, and record net income. This foundation positions us to accelerate growth and invest further into our business, all while maintaining the disciplined unit economics that underpin our long-term success. In the fourth quarter, we grew gross written premium and gross earned premium by 914% year over year. We achieved this growth while generating net income of $5 million, a decrease of $17 million year over year. In the fourth quarter, we also delivered operating income of $11 million and adjusted EBITDA of $29 million, a $24 million and $14 million decrease year over year, respectively.
The year-over-year decreases reflect deliberate investments in partnership acquisition and direct R&D marketing, as well as a modest increase in loss ratio due to elevated seasonality. We accelerated policies-in-force growth by more than double the pace of 2024. For the full year 2025, we grew our gross written premium and gross earned premiums by 1,619%, respectively. We generated net income of $40 million, an increase of $9 million year over year. In 2025, operating income was $62 million and adjusted EBITDA was $132 million. This compares to 2024 operating income of $79 million and adjusted EBITDA of $112 million. We are incredibly proud of achieving record net income in 2025.
This momentum reflects the durability of our unit economics and our continued discipline in managing fixed expenses. We ended 2025 with $312 million of unencumbered capital and maintained an excess capital position across our insurance subsidiaries. We are well capitalized as we focus on accelerated growth and believe continued execution will further reduce our cost of capital over time. Looking ahead to 2026, on the growth side, we expect to see elevated shopping and increased sequential policies-in-force growth, largely driven by tax refund season. Note that year-over-year growth will be less pronounced than what we saw in 2025, as that time period was positively impacted by increased vehicle sales in response to tariff uncertainty.
On the underwriting side, we expect more favorable gross accident period loss ratio performance relative to our Q4 results, ultimately benefiting Q1 profitability. Typically, loss ratio tends to be the lowest in the first quarter, as fewer miles are driven in the winter months. In the second and third quarters, our loss ratio tends to increase modestly as driving activity returns, and then elevates in the fourth quarter as animal collisions increase. Throughout 2026, we plan to continue investing in key strategic areas—expanding our distribution channels and national footprint, enhancing our product suite, and deepening our data science and technology capabilities. These investments are foundational to advancing long-term growth, scale, and sustained value creation.
We expect these investments, combined with a higher loss ratio, while still within our long-term target range of 60% to 65%, to result in lower full-year net income in 2026. We are entering 2026 with the team, the technology, and the momentum to scale without compromise. With that, we look forward to your questions. Thank you.
Operator: We will now open for questions. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be one moment while we poll for questions. We will take a question from Thomas Patrick McJoynt-Griffith with KBW.
Thomas Patrick McJoynt-Griffith: Hey, good evening. Thanks for taking our questions. The first one here is regarding your anticipation for accelerating PIF growth in 2026. In the shareholder letter, you talked about the five different growth drivers. Should we think of those as sort of the ranking that you were thinking about in terms of what is going to be most impactful to drive PIF growth?
Megan Binkley: Yes. Thanks, Tommy.
Alexander Timm: I would not say that those are necessarily in order. I will say pricing, which is really the first lever that we listed, is going to be, and continue to be, the tide that lifts all ships. As we get better at pricing, we really see that hit both our direct channel and our independent agent channel. Similarly, as we expand geographies, that will open up, again, more growth opportunities for our direct machine as well as our independent agent machine and our partner machine. All of those are really intimately linked to one another, and they actually have a really nice way that they work together. Independent agents, of course, has been our fastest-growing channel to date.
It has more than tripled year over year in new writings, and we are in about 10% of appointed agents nationwide. We think that has a really strong growth opportunity that we are executing on currently and is going really well for us. On the connected vehicle ecosystem, we are really excited about the announcement that we are sharing with Toyota. We think we are just getting started there. Those might take a little bit longer to get to scale as we crawl, walk, run through those integrations and those strategies similar to what you saw with Carvana. On our direct machine, we are continuing to optimize that.
We have grown our direct new writings really well for the last three quarters straight as we have continued to optimize that machine. I think you are going to see real, positive progression across all of those, and as each one begins to execute, it has positive effects on all of the others. That is really what I would expect.
Thomas Patrick McJoynt-Griffith: Thanks for the color there. You also mentioned a willingness to see average premium per policy come down a little bit as you price risk more accurately, and that can help with retention. Do you have an expectation for the magnitude that we could see the average premium per policy come down? It has decelerated pretty decently over the past year. I just want to get a sense of where that could go terminally.
Alexander Timm: Again, what is driving this is as we have been better and better at segmenting risk, which we are rapidly getting better at through our AI and ML pricing models. As we continue to refine those, we are finding the ability to actually continually lower...
Megan Binkley: The increases that we are expecting—what exactly...
Unknown Analyst: Do you also...
Megan Binkley: I guess, just a better look at what kind of data you will be getting from the partnerships and...
Unknown Analyst: Dealing with.
Alexander Timm: You, of course, cannot...
Megan Binkley: Changing. And really, what we are doing is we are using all of that so people, in as much data as are active.
Unknown Analyst: It has been moderating for some time now, but how are you kind of prioritizing retention versus—we were still able to grab your writing using the direct email. So we just continue first.
Megan Binkley: There than we do on the...
Unknown Analyst: From there, of course, price is important. And then the third, I would say, is our product features work...
Alexander Timm: In your pricing for 2026?
Unknown Analyst: Loss ratio...
Megan Binkley: How do we think about the...
Unknown Analyst: And they talk about in 2026, the first one being acquisition.
Megan Binkley: 06/2024, and 2025. Percent of gross term premium. When you compare 2025 to 2026, you know, we are continuing to make—important to note, you know, most of our technology and...
Unknown Analyst: Your tech and dev and DNA line item. I hope I can get your question.
Megan Binkley: Yeah. And just to kind of round it out, so it sounds like that kind of puts you somewhere...
Unknown Analyst: Around a 100. Around independent agents. It sounds like you have got some really...
Megan Binkley: And so the independent agents have had material staying power, and the way they have done that is actually through their...
Unknown Analyst: Lives, and we are—we are doing that.
Megan Binkley: I think, you know, Google—that is where you are going to see, I think, AI really play big role.
Unknown Analyst: But beyond that, it is really much more...
Alexander Timm: That is used actually directly to predict also who is going to get in an auto accident based on really strategic assets that we just built. Thank you. And these things, the better and better they get. The second is the ability to actually collect all of the underwriting data, whether that is telephone, telemetry, vehicle—do that. We have got to be a regulated insurance carrier.
Unknown Analyst: And tell them.
Alexander Timm: Having the scale required—that is making me more reflective really within calling the pricing. But you are going to see really the differences amongst carriers—haves and have-nots on AI. In terms of distribution, chatbots—we can on that and we can monetize. First question is on the accelerating annual improving retention just given your lower pricing and just lower rates across the industry, or is the vast majority of that—you know, our goal in 2026 is bring up the cost all of our channels. We are expecting, you know, in a year-over-year basis, that makes us a lot better—profitable growth—going into—to continue investing in...
Unknown Analyst: And in 2026. As we look live, we...
Alexander Timm: And that was really transportions amount in recent months, and I can help them think about the premium per policy for an eight. I am guessing with your new OEM partner, you have seen some of the loss cost data already on it. I recognize it is premature, but do you see a large drop—so first, I think it is important to know where we are. And where we are right now is we are still...
Unknown Analyst: Seeing a lot of those people that have—and how...
Alexander Timm: Trend. And so we have not yet seen the crest of that where suddenly average premiums are coming down materially. Bringing a lot of these—fully autonomous vehicles are getting materially fewer accidents, often, you know, 80% to 90% fewer accidents than—or whether there is just camera technology—all of its impact. When, by the way, when that technology is used, there are a few adjustments to that. It will actually grow your predictiveness, and so you have got to be really nuanced in the way that you, again, use this data. We do believe over time—to return these samples.
And as for those vehicles and whether that turns into product liability coverage or whether that turns into—I think the important part is through our embedded platform, where we have a clear lead in the market, and through our deep OEMs, through—and to help execute their strategies as that continues to move forward. And we are really excited for that because we think we are probably the best...
Unknown Analyst: Position.
Operator: There are no further questions at this time. This does conclude today’s teleconference. Thank you for your participation. You may now disconnect.
