Charlie

Charlie asked about the specific data Root receives from OEM partnerships for pricing, how Root prioritizes retention versus new business acquisition in the current pricing environment, and the company's loss cost inflation assumptions for 2026.

Answer

Co-founder and CEO Alex Timm explained that the data from OEM partnerships varies by OEM and vehicle model, including basic telemetry, ADAS, and autonomous features, all used to refine pricing models. He noted the system's flexibility to handle different data types (past vs. streaming). On retention, Mr. Timm stated that customer profile, appropriate pricing across segments, and product features like flexible billing are key drivers. He also mentioned that Root has continued to grow new writings despite increased competition. For 2026 loss cost inflation, Mr. Timm indicated a low single-digit net trend environment.

Charlie inquired about the specific resolution of non-performing assets (NPAs) that led to the $11 million in charge-offs, asking if they were related to previously identified commercial real estate (CRE) and commercial & industrial (C&I) credits. He also sought clarification on expense growth expectations, future initiatives, and the sustainability of the efficiency ratio in the mid-50s.

Answer

President Dave Antolik confirmed that the charge-offs were directly related to previously identified problem credits, noting new NPL formations but emphasizing significant progress in reducing criticized and classified (C&C) loans by 50% over three years. He projected a 3% year-over-year expense increase, with FTE growth primarily in production-related roles, and affirmed that a mid-50s efficiency ratio is a sustainable target.