Root - Q4 2025

Transcript

Operator (participant)

Greetings, welcome to the Root, Inc. fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Matt LaMalva, Head of Investor Relations and Corporate Development. Please go ahead, sir.

Matt LaMalva (Head of Investor Relations and Corporate Development)

Good afternoon. Thank you for joining us. Root is hosting this call to discuss its fourth quarter and full year 2025 earnings results. Participating on today's call is Alex Timm, Co-founder and Chief Executive Officer; Jason Shapiro, Senior Vice President of Business Development; and Megan Binkley, Chief Financial Officer. Earlier today, Root 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-K. 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 Form 10-K 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'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 Alex.

Alex Timm (Co-founder and CEO)

Thanks, Matt. 2025 was another strong year for Root. 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 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, we are seeing this come through the numbers. In the last 12 months, we increased our LTVs by more than 20% on average by just doing better math. While 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. Our technology advantage doesn't 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.

As the direct channel grew, it moved to inundating customers with ads. Today, whether it's 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 was built for. I'd like to share our growth strategy that consists of 5 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 the end of 2027. There's no reason our model doesn't 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. Jason will go into more details on this exciting partnership on today's call. 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're 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 to become one of the defining insurance companies of the next decade. I'll now turn the call over to Jason to talk about our exciting partnership results.

Jason Shapiro (SVP of Business Development)

Thanks, Alex. I'd like to spend a few minutes on our partnerships channel, what we've built, why it matters, and why we believe it represents a durable competitive advantage for Root. Over the past 2 years, we have built a partnerships business that was nearly half of overall new writings in the 4th quarter and is achieving our profitability and loss ratio target. That growth has been delivered. It's 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. 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 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 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 an 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 Vertaore 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, it means profitable growth in a channel that represents roughly 1/3 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're 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 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 at varying levels of depth, from API-driven quoting experiences with 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'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. Alex 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 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 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. 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. The momentum is real. The integrations are deepening. The contribution to near-term growth is accelerating. More importantly, we've built the technical and strategic foundation to continue compounding that growth. We believe that is a competitive advantage that will endure. I'll now turn the call over to Megan.

Megan Binkley (CFO)

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 9% and 14% 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 the fourth quarter of 2024. For the full year of 2025, we grew our gross written premium and gross earned premiums by 16% and 19%, 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 the first quarter of 2026, on the growth side, we expect to see elevated shopping, 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 the first quarter of 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, our loss ratio tends to be the lowest in the first quarter, as less 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%-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.

Operator (participant)

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. One moment while we poll for questions. We'll take a question from Tommy McJoynt-Griffith with KBW.

Tommy McJoynt-Griffith (Director of Equity Research)

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's going to be most impactful to drive PIF growth?

Alex Timm (Co-founder and CEO)

Thanks, Tommy. I wouldn't say that those are necessarily in order. I will say, you know, pricing, which is really the first lever that we listed, that's going to be and continue to be the tide that lifts all ships, right? 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. You know, independent agents, of course, has been our fastest-growing channel to date.

It's more than tripled year-over-year in new writings. Again, you know, we're in about 10% of appointed agents nationwide, and so that, we think has a really strong growth opportunity that we are executing on currently, and is going really well for us. On the connected vehicle ecosystem, you know, we're really excited about the announcement that we're sharing with Toyota. We think we're 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, you know, we're continuing to optimize that.

That's grown, you know, we've grown our direct new writings really well for the last three quarters straight, as we've continued to optimize that machine. I think you're going to see, real positive, progression across all of those. As each one, begins to execute, it has positive impacts on all of the others. That's, that's really what I'd expect.

Tommy McJoynt-Griffith (Director of Equity Research)

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's decelerated pretty decently over the past year. We just want to get a sense of where that could go terminally.

Alex Timm (Co-founder and CEO)

Yeah, again, really what's driving this is as we've been better and better at segmenting risk, which we're rapidly getting better at through our AI and ML pricing models, as we continue to refine those, we're finding the ability to actually continually lower prices for our customers while continuing to post strong net income and strong loss ratios. That's really the beauty of the model. We believe long term, that actually creates a moat around our customers because we're continually expanding our pricing advantage in the market. Again, price is the number one reason a consumer purchases insurance and chooses a particular carrier. It's also the number one reason they leave. As we do that, we believe that we're continuing to build a structural advantage into the business.

Yeah, we still have our new model out there. Some are still renewing onto that model. You might see a slight decrease in average premiums, you know, through the first quarter. You know, we think it will probably normalize thereafter.

Megan Binkley (CFO)

Tommy, if I could just layer on to that. You know, Alex talked about the increases that we're expecting in terms of growth on a year-over-year basis. Keep in mind that is going to translate into an increase in acquisition investments throughout 2026. You know, keep in mind also that as we continue investing in the partnership and IA channel, you're going to see that growth translate to increased acquisition expense through other insurance expense line item. We are also planning to continue scaling our direct channel, which shows up in the sales and marketing line item.

Tommy McJoynt-Griffith (Director of Equity Research)

Thank you.

Operator (participant)

Next, we'll move to Andrew Anderson with Jefferies.

Speaker 8

Hi, guys. This is Charlie on for Andrew. I want to start kind of just more broadly with a question regarding the OEM partnerships in general. What exactly is the data that you guys are receiving and pricing based on? Is it more, you know, behavioral telemetry data, or do you also kind of look at whether or not autonomous or ADAS features are enabled, or how often they're enabled? I guess just a better look at what kind of data you'll be getting from these sorts of partnerships and what you are either able to or plan to price on with that.

Alex Timm (Co-founder and CEO)

Thanks, Charlie. It, it's really dependent on each individual OEM. We've now partnered with several OEMs, and they all have their own strategies. you know, some OEMs have publicly available APIs that you can really any company can integrate with, which is simple consumer consent. Others require more deeper integrations. Through these integrations, all of the data is different, depending on what vehicle model you're dealing with. You, of course, get the basic telemetry data from pretty much all of these, but then you're increasingly getting access to more data than that. That includes both ADAS features, as well as autonomous features. As that data continues to progress, you know, it's still changing.

We are also seeing actually additional data features being added to a lot of this as the vehicle technology is changing. Really, what we're doing is we're using all of that. We pull in as much data as we possibly can from every OEM. We actually work very closely with these OEMs, too, in terms of the specific data that we're getting and that we can get access to, proactively actually see if we can get even more data off of these vehicles. We're using all of that data to really make sure that our models are appropriately fit to each specific model and OEM, because it's very, very important. Again, all of these are very different. That's really what we're getting.

You know, some OEMs, the other nuance here, some OEMs will give you data on a consumer in the past. You download the Root app, and we can see that we have driving data on you, and we can immediately give you an insurance quote with telematics involved. Others will only do streaming and only have streaming capabilities on a go-forward basis. You've really got to have a flexible system that understands the nuance between every single OEM in order to successfully use this data.

Speaker 8

Okay, thanks. Then I guess just looking at the overall pricing environment for the industry, right? We're looking at, you know, pricing has been moderating for some time now. It's likely to turn negative pretty soon for the industry. I know you guys are talking about accelerating PIF and also trying to compete on price as well, but how are you kind of prioritizing retention versus new business acquisition? Maybe how does that look different within the different channels? I guess just kind of looking at retention, what levers, aside from pricing, I suppose, are your kind of key ones within those five for improving retention rather than growth?

Alex Timm (Co-founder and CEO)

Yeah, absolutely. Yeah, I would say, you know, we saw and we've continued to see increased competition really over the past year, and, you know, you still saw us grow impressively. You know, I had just mentioned over the last three quarters, despite the increase in competition, we were still able to grow new writings, even in the direct channel. You know, just matched us through continuing to refine our models within marketing. We, we still believe that we can grow the company actually across cycles, which is important to note. On retention, the first and the biggest driver of retention is customer profile.

And there, what we're doing is we're making sure that we're appropriately priced really across the spectrum, from really preferred business, all the way to more non-standard business, as well as showing up where all of these different segments are shopping for insurance. So if that's in independent agents, for example, you know, we see a different customer mix come through there than we do on the direct business. So that's one of the biggest needle movers to driving retention, is making sure that we're targeting the right distribution channels. From there, of course, price is important. Then the third, I would say, is our product features.

We're constantly working to make our product more flexible for customers, whether that's flexible billing schedules, whether that's different grace periods, and so we're actively working there to continue to improve retention, and we've seen good results.

Speaker 8

Okay, if I could just quickly slip one last one in. What kind of assumptions are you guys embedding in your pricing for 2026 regarding loss cost inflation?

Alex Timm (Co-founder and CEO)

Right now, we're in roughly a low single digit, probably net trend environment, and so that's really where we're thinking we're going to end up.

Speaker 8

Great. Thanks, guys.

Operator (participant)

Next, we'll move on to Andrew Kligerman with TD Cowen.

Andrew Kligerman (Managing Director)

Good evening. My first question, I guess Megan kind of talked about the kind of targeted 60%-65% accident year loss ratio, and you kind of, in the fourth quarter, came squarely in between that. Just looking through 2026, 2027, how do we think about that? Megan talked about investing in various areas. How do we think about that 32.5% expense ratio? Where does that kind of settle out? I guess it kind of bumps from quarter to quarter. And are you, on a combined ratio basis, kind of looking to, I think you've said in the past, 100% or maybe slightly even higher than 100% is sort of a going combined?

Maybe you can help me think through the timeline for that.

Megan Binkley (CFO)

Thanks, Andrew. It's a good question. You know, as we think about the loss ratio expectations in 2026, you know, I think it's important to keep in mind that, you know, as you mentioned, our long-term loss ratio target is between 60 and 65. On a full year basis, we've been operating below that for quite some time now, both in 2024 and in 2025. As we look to accelerate new business growth in 2026, and as we expand our distribution channels with more new business, that mix is naturally gonna carry a higher loss ratio than the renewal business, though we do still expect to remain within our long-term loss ratio targets.

On the expense ratio side, you know, when we think about operating expenses, we really think about them in two main components. The first one being acquisition expense. You can expect that, you know, as we continue our investments into growth in 2026, consistent with what you saw in both 2024 and 2025, we're gonna continue to spend from an acquisition perspective. We're comfortable increasing that spend as long as we continue to meet our unit economic or profitability targets. The acquisition expense really mainly runs through sales and marketing and other insurance expense. I think I hit on this earlier. As we continue to invest in the partnership and independent agent channels, you're gonna see more acquisition expense actually show up in other insurance expense.

Lastly, on the fixed expense cost, you know, we do expect that our fixed expense will remain relatively flat as a percentage of gross earned premium. When you compare 2025 to 2026, you know, we are continuing to make targeted investments in our product and our technology as we look to scale our proprietary platforms and distribution channels. Important to note that, you know, most of our technology and talent costs really roll up into your tech and dev and G&A line item. You know, as we think about these line items as a percentage of GEP, you can expect some consistency in 2026, as you saw in 2025. I hope that answers your question.

Andrew Kligerman (Managing Director)

Yeah, just to kind of round it out, it sounds like that kind of puts you somewhere around 100% combined. Is that right?

Megan Binkley (CFO)

Yeah. You know, we think about it more in terms of, you know, specific investments that we're making in 2026. You know, we don't necessarily want to give a guide for a specific combined ratio, particularly given the way that we manage the direct marketing expense. If we identify opportunities to push into growth, particularly in direct, we're certainly going to do that. You could see the combined ratio increase on in certain quarters, really driven by, you know, our appetite for growth.

Andrew Kligerman (Managing Director)

understood. I guess next question is around independent agents. It sounds like you've got some really robust opportunity there. Of course, you know, maybe in the last couple of weeks, investors have assumed that the independent agency channel is going to die because AI is going to completely displace it. You know, I'm intrigued by your interest in growing in the independent channel and how you think AI will affect that channel going forward.

Alex Timm (Co-founder and CEO)

Yeah, I think, you know, well, one, first, I'd say if I take a step back, there's $100 billion of premium today going through independent agents. It's, you know, roughly a third of the market. If I go back, by the way, 10 years ago, it was a third of the market. If I go back, 50 years ago, it was roughly a third of the market. So the independent agents have had material staying power, and the way they've done that is actually through evolving their businesses, and we're still seeing that today. We actually have 2 partners, both of which function as independent agents, that are actually already live within ChatGPT, and generating, effectively, quotes. We are there, and we are live, and we're doing that.

I think, you know, Google, a lot of independent agents still advertise on Google. I think what you're gonna see is consumers will continue to move, but a lot of what's going to happen is you're gonna see companies continue to adapt. You know, I think things like chatbots and those types of experiences are gonna become commoditized, and that's where you're gonna see, I think, AI really play a big role, at least in terms of distribution. We don't. We think that that's actually a much smaller opportunity compared to the opportunity to actually apply a lot of the underlying advancements in really prediction sciences that are underlying a lot of these LLMs.

That sure might be used for predicting the next word in a sentence, but that can now be used actually directly to predict also who's going to get into an auto accident and who's not. What we've seen is that opportunity is far larger, and it's based on. Importantly, it's based on really strategic assets that Root has built. Namely, you know, proprietary claims data. We have $1.5 billion in revenue of auto claims. That's required to actually put, you know, the more data you give these things, the better they get. The second is the ability to actually collect all of the rich underwriting data, whether that's telephone telemetry, vehicle telemetry, behavioral data from consumers, traditional underwriting variables, and then ultimately price and by using all of these variables.

To do that, you've got to be a regulated insurance carrier. A lot of the data that we have is proprietary. The technology that we have is proprietary, and then the regulatory structure also creates big barriers for really anybody to come in to the space. That gives us the advantage. We're really at a unique spot when you look at the industry of both having the scale required to make these new modern quantitative methods work really within claims and pricing, but then also have the technology and the nimbleness to be able to apply it. I think we believe that over the long term, that creates a structural advantage on pricing, and that's where you're going to see really the differences amongst carriers, between the haves and the have-nots on AI.

In terms of distribution, chatbots, we think a lot of that's going to be commoditized.

Andrew Kligerman (Managing Director)

Thanks for that, Alex.

Operator (participant)

The next question we'll hear from Elyse Greenspan with Wells Fargo.

Elyse Greenspan (Managing Director)

Hi, good afternoon. My first question is on the accelerating annual PIF growth, that's versus the 16.2% uptake we saw in 2025. I guess, how much of that accelerating growth is based off improving retention, just given your lower pricing and just lower rates across the industry? Is the vast majority of that accelerating growth going to stem from the IA channel growth and the national footprint expansion?

Megan Binkley (CFO)

Yeah. Thanks, Elyse. You know, our goal in 2026 is to invest in growth across all of our channels. We are expecting, you know, on a year-over-year basis that, you know, we're going to grow our gross written premium, our PIF, and our premium in force. That's really, you know, building and compounding on our pricing advantage that Alex talked about earlier. One thing I do want to highlight, you know, as we think about sequential quarter growth and going into Q1, you know, thus far we have, you know, continued to see sequential PIF growth from Q4 to Q1. We do expect to continue investing in profitable growth across both of our distribution channels in 2026.

As we look back to, you know, this time last year, and I hit on this in my prepared remarks, you know, one thing I just want to caution is Q1 of 2025 was an exceptionally strong growth quarter for us, and that was really driven by, in part, by tariff-related pull forward and shopping activity. It will be tough to do a year-over-year comparison, Q1 to Q1. To be clear, overall, you know, we are continuing to invest in growth, and we expect to have annual PIF growth year over year.

Elyse Greenspan (Managing Director)

Got it. Thank you. For my second question, we've seen a few direct autonomous solution insurance partnerships announced in recent months, and I guess, how should we think about the premium per policy for an AV vehicle versus a non-AV vehicle over the long run, as we've seen some aggressive price cuts on that cohort, given the lower frequency. I'm guessing with your new OEM partners, you've seen some of the loss cost data already on it. I know I recognize it's premature, but do you see a large drop-off in premiums for policy in the long run for this cohort, or higher severity will be a larger offset than the lower frequency?

Alex Timm (Co-founder and CEO)

First, I think it's important to note where, you know, where we are. Where we are right now is we are still seeing a lot of those vehicles that have a fully autonomous continuing to have loss cost rise. We are still seeing, you know, a healthy amount of increase and positive trend. We haven't yet seen sort of the crest of that, where suddenly average premiums are coming down materially. That said, you know, our belief is certainly that vehicle technology is going to continue to progress, and that as that vehicle technology progresses, it is of course, much cheaper. You know, a lot of these fully autonomous vehicles are getting in materially fewer accidents, often, you know, 80%-90% fewer accidents than human-driven vehicles.

It's important that not all of that technology is created equal as well. So, you know, whether there's lidar on the car or whether there's just camera technology, all of this impacts. By the way, when that technology is used, is it being used through a city street, or is it being used on a highway? If you just sort of naively apply, you know, any sort of pricing adjustment to that, it will actually erode your predictiveness. So you've got to be really nuanced in the way that you, again, use this data. We do believe over time, what this will do, as autonomous vehicles become more prolific, we will then be well positioned with these partnerships that we have with OEMs to insure these vehicles.

And as we insure those vehicles, you know, whether that turns into product liability coverage or whether that turns into personal coverage, by the way, we think there'll be a hybrid world for a very, very long time, where sometimes it will be personal liability, sometimes it will be product liability. I think the important part is through our embedded platform, where we have a clear lead in the market, and through our deep OEM relationships, we are really positioned at the forefront to allow and to help and assist these OEMs really see their strategies through and to help execute their strategies as that continues to move forward. We're really excited for that because we think we're probably the best positioned in the industry to do so.

Elyse Greenspan (Managing Director)

Thank you.

Operator (participant)

There are no more further questions at this time. This does conclude today's teleconference. We thank you for your participation. You may now disconnect your lines at this time.