Root lost more than $85 million in its 2020 third quarter – its first as a public company following an initial public offering in October that raised $724.4 million.
The Ohio-based digital auto insurance InsurTech announced its Q3 2020 results after the markets closed on Dec. 1. A day later, Root’s stock price closed at $14.70 on Dec. 2, down more than 13.5 percent ($2.30) from its previous close in apparent response to the news.
Root’s stock price debuted at $27 per share.
In a shareholder letter to investors, Root framed its overall situation as one of ongoing improvement, with continued aggressive steps toward future growth and success. Along those lines, Root disclosed in the letter that it closed the acquisition of a shell company with property/casualty licenses in every state and the District of Columbia. Root is currently in 30 states, and said the shell company acquisition will allow it to launch into many other states through 2021, pending regulatory approvals.
Root said it booked an $85.2 million net loss in the 2020 third quarter, or negative $2.20 per diluted share. That’s an improvement over the $100.2 million net loss, or negative $2.88 per diluted share, reported during the same period a year ago.
Root produced nearly $45 million in net premiums earned during Q3 2020, down from $75.8 million in the 2019 third quarter
Other Root results for Q3:
- Net auto policies in force surpassed 322,400, up from more than 242,600 in the 2019 third quarter.
- Renters insurance policies in force (a newer area for Root) hit 7,367, compared to 825 the year before.
- Auto insurance premiums in force landed at $599 million during the quarter, versus $425.6 million the previous year.
- Renters insurance premiums in force were at $1 million, versus negligible levels in the 2019 third quarter.
- Gross profit came in at $700,000 during the quarter, versus a negative $36.5 million the year before.
Root, which has been hiring and expanding its operations, also reported higher technology and administrative expenses year-over-year.
Editor’s Note: In the Root earnings report, gross profit of $0.7 million is calculated by subtracting net losses and loss adjustment expenses ($76.1 million), and adding other insurance benefits ($26.3 million) to net revenues ($50.5 million). Net revenues include net earned premiums, net investment income, realized gains and fee income.
Other expense items (for sales and marketing, tech and development and general and admin expenses) reduce the profit down to the bottom-line net loss figure of $85.2 million.