Root sees growth amid another big loss
Root’s financial results in its second quarter as a public company looked much like its first quarter: a steep loss even as the number of drivers and renters signing up with the Columbusbased insurer continues to grow.
Root posted a loss of $133.2 million for the quarter that ended Dec. 31, up from $85.4 million for the same period in 2019, the company said Thursday. The loss was 72 cents per share vs. $2.30 in the 2019 period, when the company had fewer shares outstanding.
Revenue fell to $50.9 million in the quarter from $106.5 million in the 2019 fourth quarter. The company has attributed the drop to a new reinsurance program, a process where insurers transfer a portion of their portfolios to other parties to reduce risk.
Root’s preferred metric is to go by in
surance premiums paid by customers. That metric jumped by 30% in the quarter from the same period in 2019 to $155 million.
That Root is posting big losses is not unusual for young, public companies focused on technology.
Policies in force grew 15% over the year to 322,759. The company also had 7,739 renters policies in place as of Dec. 31.
For all of 2020, direct earned premium grew by 71% from 2019 to $605 million despite scaling back its marketing during the pandemic.
“Against this challenging backdrop, I am extremely pleased to report that Root finished 2020 stronger and better positioned to achieve our ambitions of profitably growing our business, continuing to disrupt the traditional insurance industry, and delivering consistent, long-term value creation for our shareholders,” cofounder Alex Timm said in a letter to shareholders.
Root launched in 2015 under the notion that machine learning and modern technology could revolutionize an old and stodgy industry while offering a superior consumer proposition and experience.
Drivers download the Root app to their phone and then drive as they normally would.
The app tracks speed, rapid acceleration, hard stops, swerves and whether drivers are fussing with their phone while behind the wheel.
After some time, usually two or three weeks, Root evaluates whether the driver is good enough to warrant coverage – and what to charge for that coverage based on driver behavior.
For 2021, the company said it is targeting expansion into new states and new product launches, investments that Timm said ultimately will drive long-term returns and shareholder value.
As was the case with the first report, investors weren’t impressed with the result.
Shares fell about 4% in trading after the stock market closed to below $16.
Root shares have struggled since going public last October at $27 per share. mawilliams@dispatch.com @Bizmarkwilliams