Executive Summary

Root delivered a second consecutive quarter of GAAP profitability, with Q4 total revenues of $326.7M, net income of $22.1M, and diluted EPS of $1.30; adjusted EBITDA was $43.1M, and gross/net combined ratios improved to 90.6%/91.5% .
Versus prior quarter, revenue and EPS increased (Q3 revenue $305.7M; EPS $1.35), with continued underwriting strength despite a modest uptick in accident-period loss ratio (61.4% in Q4 vs. 58.4% in Q3) .
Management highlighted reinsurance cession down to ~9% of gross earned premium in Q4 with tail-risk covers maintained; interest expense run-rate expected to be reduced ~50% in 2025 following the BlackRock refinancing .
Strategic catalysts: accelerating partnerships (about one-third of Q4 new business), measured state expansion (launch of Minnesota; reach 76% of U.S. population), and disciplined rate reductions in select states supported by sub-target gross loss ratio performance .

What Went Well and What Went Wrong

What Went Well

Sustained profitability with strong operating leverage: net income $22.1M and adjusted EBITDA $43.1M in Q4; operating income $34.9M (vs. prior-year loss), driven by net earned premium growth and disciplined expenses .
Reinsurance optimization: cession of earned premium around 9% in Q4; plan to keep cession materially consistent while focusing on per-risk and CAT covers, enhancing retained economics .
Strategic distribution momentum: partnerships represent roughly one-third of Q4 new writings; embedding (e.g., Carvana Insurance “3‑click bind”) and agency investments support longer retention and higher average premiums; “we more than doubled our new writings in 2024” .

Quotes:

“2024 was a landmark year for Root… generating GAAP net income of $31 million and adjusted EBITDA of $112 million” .
“We see longer retention [in partnerships]… higher average premiums… [and] we incur [commissions] over a longer period of time” .
“Because our gross loss ratio continues to trend below our long-term target of 60% to 65%, we are able to reduce rates in select states” .

What Went Wrong

Accident-period loss ratio ticked higher sequentially (61.4% Q4 vs. 58.4% Q3), with severity up ~2% YoY and frequency down ~2%; moderation expected, but slight loss ratio increases possible with rate decreases .
Marketing spend moving more mid-/upper-funnel may drive near-term P&L pressure; management will invest at targeted IRRs but acknowledged possible quarterly EPS variability .
Competition increased modestly in Q4; management expects stability but remains vigilant on acquisition efficiency .

Financial Results

Metric	Q4 2023	Q3 2024	Q4 2024	Consensus (S&P Global)
Total Revenue ($USD Millions)	$194.8	$305.7	$326.7	—*
Net Premiums Earned ($USD Millions)	$176.0	$279.3	$299.7	—*
Net Income ($USD Millions)	$(24.0)	$22.8	$22.1	—*
Diluted EPS ($USD)	$(1.64)	$1.35	$1.30	—*
Adjusted EBITDA ($USD Millions)	$(0.3)	$41.6	$43.1	—*
Gross Combined Ratio (%)	109.7%	89.2%	90.6%	—*
Net Combined Ratio (%)	111.9%	91.1%	91.5%	—*
Gross Accident-Period Loss Ratio (%)	63.7%	58.4%	61.4%	—*
Policies in Force (Units)	341,764	407,313	414,862	—*

*Estimates unavailable due to S&P Global access limits. Values would be retrieved from S&P Global.

Reinsurance/Written & Earned Premium breakdown:

Metric	Q4 2023	Q3 2024	Q4 2024
Gross Premiums Written ($USD Millions)	$279.2	$331.7	$330.5
Ceded Premiums Written ($USD Millions)	$(50.5)	$(27.1)	$(18.6)
Net Premiums Written ($USD Millions)	$228.7	$304.6	$311.9
Gross Premiums Earned ($USD Millions)	$214.4	$317.0	$331.0
Ceded Premiums Earned ($USD Millions)	$(38.4)	$(37.7)	$(31.3)
Net Premiums Earned ($USD Millions)	$176.0	$279.3	$299.7

KPIs and Ratios:

Metric	Q2 2024	Q3 2024	Q4 2024
Policies in Force (Units)	406,283	407,313	414,862
Premiums per Policy ($USD)	$1,522	$1,558	$1,584
Premiums in Force ($USD Millions)	$1,236.7	$1,269.2	$1,314.3
Direct Contribution ($USD Millions)	$87.0	$110.5	$115.8
Adjusted EBITDA ($USD Millions)	$12.1	$41.6	$43.1
Gross Loss Ratio (%)	61.6%	57.1%	56.8%
Gross LAE Ratio (%)	9.4%	8.3%	6.9%
Gross Combined Ratio (%)	99.9%	89.2%	90.6%
Net Combined Ratio (%)	102.7%	91.1%	91.5%

Guidance Changes

Metric	Period	Previous Guidance/Commentary	Current Guidance/Commentary	Change
Reinsurance cession of earned premium	Near-term run-rate	Q3: ~12% ceded; shift away from quota share, maintain CAT/per-risk covers	Q4: ~9% ceded; expect materially consistent cession levels going forward	Lowered
Interest expense run-rate	FY 2025	Expect ~50% reduction post-refinancing (BlackRock)	Expect ~50% reduction maintained	Maintained
Loss trend / loss ratio outlook	FY 2025	Stable rates; opportunities to reduce rates in select states	Low-to-mid single-digit loss trend; modest rate decreases; slight loss ratio increases possible, “nothing material”	Clarified; modestly cautious
Marketing investment level	FY 2025	Reinvent profits; expand mid-/upper-funnel channels; modest increase	More mid-/upper-funnel (YouTube, video, direct mail) with rigorous IRR; potential quarterly P&L pressure	Expanded scope
State expansion	FY 2025	Target national footprint; filings underway	Launched Minnesota; reach 76% of U.S. population; more filings pending	Progressed

Earnings Call Themes & Trends

Topic	Q2 2024 (Prior-2)	Q3 2024 (Prior-1)	Q4 2024 (Current)	Trend
Pricing & Underwriting	Strong gross loss ratio (61.6%); select rate reductions possible	Best-in-class gross loss ratio (57%); rate reductions in select states	Below 60–65% target; reducing rates in select states; agile actuarial reviews	Continuing discipline; selective rate cuts
Reinsurance strategy	Reduced difference gross vs net loss/LAE to 2 pts	Ceded ~12% of gross earned; only 1-pt gap gross vs net loss/LAE	Ceded ~9%; maintain CAT/per-risk covers; consistent cession outlook	Lower cession, retain economics
Partnerships channel	+120% YoY new writings; pipeline strong	+131% YoY; Goosehead launch; stickier, “fatter” policies	~1/3 of new business; fully embedded experiences (Carvana)	Scaling; higher retention
Direct marketing	Lower-funnel focus, expand mid-/upper-funnel	Reinvest profits; expand experiments	Shift more mid-/upper-funnel (YouTube, video, mail); rigorously measured	Broader funnel; disciplined
State expansion	34 states; aim to be national	Continued filings	Minnesota launch; reach 76% of U.S. population	Expanding footprint
Retention/cohorts	Favorable partnerships retention	Cohort retention improving; partnerships retain longer	Hypergrowth churn normalizing; tailwind to PIF growth	Improving
Macro/tariffs	Weather impacts (hail in CO/TX)	Stable rate adequacy	No tariff impact assumed; rapid response if needed	Monitored; prepared

Management Commentary

“We delivered… our first full year of net income profitability… gross combined ratio of 95% on $1.3 billion of gross premiums written” (CEO) .
“In Q4… we delivered net income of $22 million… operating income of $35 million and adjusted EBITDA of $43 million” (CFO) .
“We are able to reduce rates in select states… we do not set prices with the primary goal to gain market share” (CEO) .
“Our session levels… were around 9%. We… expect… materially consistent with where they were in Q4” (CFO) .
“Refinancing… we expect to reduce our run rate interest expense in 2025 by ~50%” (CFO) .
“Partnerships… roughly 1/3 of our overall new business… Carvana Insurance… 3‑click bindable purchase experience” (CEO) .
“Minnesota launch… reach 76% of the U.S. population” (CEO) .

Q&A Highlights

Premium per policy outlook: modest rate decreases may pressure averages, offset by “fatter” partnership/agency policies; net effect flat to modestly increasing (CEO) .
Reinsurance cession: Q4 ~9% of earned premium; expect consistency; focus on CAT and per-risk covers (CFO) .
Retention: hypergrowth churn normalizing; tailwind to PIF growth; cohorts broadly consistent; no new metrics disclosed (CEO) .
Loss trend: low-to-mid single-digit for 2025; slight loss ratio increases possible with rate cuts, “nothing material” (CEO) .
Tariffs: no current impact assumed; platform enables rapid response if macro shifts (CEO) .
Ad spend: shift to mid-/upper-funnel channels with rigorous IRR discipline; potential quarterly P&L pressure (CEO) .
Channel returns: both direct and partnerships operating at target returns; partnerships have longer retention and higher average premiums (CEO) .
Competition: increased a bit in Q4; expected to be fairly stable (CEO) .

Estimates Context

Wall Street consensus (S&P Global) for Q4 2024 EPS/Revenue/EBITDA was unavailable due to access limits; no estimate comparison is provided here. Estimates would be retrieved from S&P Global if available.
Given Root’s second consecutive quarterly profitability, estimate revisions may focus on: sustained net income trajectory, lower interest expense run-rate, and retained premium economics from lower cession levels .

Key Takeaways for Investors

Profitability inflection sustained: Q4 net income $22.1M, diluted EPS $1.30; adjusted EBITDA $43.1M—supported by underwriting discipline and operating efficiency .
Reinsurance cession lowered to ~9% and expected to remain consistent—driving higher net retention while maintaining tail-risk coverage (CAT/per-risk) .
Interest expense run-rate expected down ~50% in 2025 post BlackRock refinance—structural tailwind to earnings power .
Rate actions: selective reductions in states supported by sub-target gross loss ratio; management expects only slight loss ratio increases—watch for growth-earnings tradeoffs .
Distribution mix: partnerships now ~1/3 of new business with longer retention/higher premiums; embedded integration is an incremental advantage (Carvana) .
Marketing pivot: increased mid-/upper-funnel testing may introduce quarterly EPS volatility; management emphasizes rigorous IRR discipline .
Execution priorities: state expansion (76% of U.S. now), continued pricing model upgrades (expected ~7% predictive power improvement), and automation across underwriting .

Press releases and filings reviewed:

Q4 2024 8‑K Item 2.02 and Shareholder Letter (full financials, KPIs, non‑GAAP reconciliations) .
Q4 2024 earnings call transcript ; alt copy corroboration .
Q4 2024 press release and scheduling .
Prior quarters: Q3 2024 8‑K and call ; Q2 2024 8‑K and call .

Footnote: Estimates from S&P Global were not retrievable at the time of analysis due to access limits; comparisons to consensus therefore are not included.

Root, Inc. (ROOT)·Q4 2024 Earnings Summary