Root’s net combined ratio improves to 95.6% in Q1

By Michael Loney

May 8 - (The Insurer) - Root improved its net combined ratio 6.5 points to 95.6% in the first quarter, while gross premiums written increased 24% to $410.8 million.

Columbus, Ohio-based Root reported a net combined ratio of 95.6%, which was an improvement from 102.0% in the first quarter of 2024.

The gross accident period loss ratio improved to 57.9% from 58.2%, while the gross loss ratio and LAE ratio improved 8 points year over year to 63%

Net income of $18.4 million in the first quarter compared with net loss of $6.2 million in the same period of 2024.

The adjusted Ebitda of $31.9 million was up from $15.1 million in the first quarter of 2024.

Gross premiums written increased 24% to $410.8 million, while gross premiums earned increased 25% to $344.4 million in the first quarter.

Nasdaq-listed Root’s share price closed up 1.5% at $142.03 on Thursday compared to the previous day’s close.

In a letter to shareholders, Root said its direct channel “continues to see strong results, assisted by elevated shopping during the first quarter following the holiday season.”

The partnership channel’s quarterly new writings more than doubled year over year, with Root stating “our pipeline continues to expand across the automotive, financial services, and agent sub-channels.”

Root now has more than 20 total partners. In the first quarter it launched two new strategic partnerships with Hyundai Capital America and Experian.

“As we mentioned in our last letter and earnings call, we have started to accelerate investment in our business across the customer acquisition funnel and in our pricing and underwriting technology to support our growth trajectory,” the letter said.

On an earnings call, Root CEO Alex Timm said the seasonal favorability in the quarter was largely driven by tax refunds, elevated shopping behavior and lower miles driven.

“We tend to see this benefit in the first quarter of every year and do not expect this tailwind to persist into the rest of 2025. Most importantly, we have achieved this growth while maintaining our underwriting discipline, which continues to be our north star,” he said.

Chief financial officer Megan Binkley highlighted that Q1 was Root’s third consecutive quarter of profitability.

She said that the loss ratio is typically higher in Q2 driven by the convective storm season and Q3 driven by the hurricane season.

“So we do expect that the loss ratio will increase in Q2 and Q3 to align with our long-term target, which is between 60% and 65%,” she said.