Root turns on marketing and grows

Root Insurance released its Q4 2023 results, ending the quarter and year with ~342k policies in force, an increase of 82k policies compared to the end of Q3 2023.

The startup ramped up marketing, spending more in the quarter ($26.5M) than the first three quarters ($22.8M). Root believes it could achieve profitability in the near term by reducing marketing investments but that’s not the plan. “It’s important to note that we believe we could achieve profitability in the near term if we determined reducing our marketing investments was the best approach to drive shareholder value. However, this would require us to forgo significant amounts of accretive business, reduce our share of market, and ultimately come at the expense of building long-term shareholder value.”

Root added more policies during the quarter than any other quarter since becoming a public company. However, the company is 39k policies short compared to Q3 2021.

During the quarter, net loss ($24M) improved 59% compared to Q4 2022. Net loss for the year stood at $147M, compared to $298M in 2022.

Root improved net combined ratio by 68 points to 112% in Q4 2023. The company reported a net combined ratio of 133% for the year.

For the year, gross premiums written increased 31% to $783M.

During the quarter, renewal premium as a percentage of gross premiums earned stood at 42%, a significant decline compared to the 81% that was reported in the same quarter last year.

When it comes to new premium contribution, Root’s embedded channel continues to decline.

The direct channel was Root’s primary growth driver in 2023, fueled by performance marketing and organic traffic.