How Could Root Insurance Fix Its Revenue Issues in 2027?
Root does not have a profit problem, it has a growth problem. In the second quarter of 2026 it reported $389.2 million of total revenue and $25.4 million of net income, but gross premiums written fell to $339.7 million from $346.2 million a year earlier, and policies in force slipped to 483,921 from 495,429 the quarter before (Q2 2026 shareholder letter).
The most credible fix, in our analysis, is to turn its strong underwriting margin into more profitable growth: launch the new pricing model it says is coming in the fourth quarter, lean further on partners and independent agents, and add states. This page separates reported figures, each with its period, from our opinion, which is labeled as ours. It is not investment advice, and Root's third quarter 2026 results had not been published when we wrote this.
What Root reported for the second quarter of 2026
Root, Inc. (NASDAQ: ROOT) is an auto insurer founded in 2015 and based in Columbus, Ohio. All figures below are from its own shareholder letters, filed with the SEC as Exhibit 99.1 and published on its investor relations site, for the quarter ended June 30, 2026, unless another period is named (Q2 2026 letter).
- Total revenue, Q2 2026$389.2 million, up 2% year over year (Q2 2025: $382.9 million).
- Net income, Q2 2026$25.4 million (Q2 2025: $22.0 million).
- Gross written premium, Q2 2026$339.7 million, down 2% year over year (Q2 2025: $346.2 million).
- Policies in force at June 30, 2026483,921, up 6% year over year; 495,429 at March 31, 2026.
- Premiums per policy$1,479 at June 30, 2026, versus $1,616 at June 30, 2025.
- Net combined ratio, Q2 202692.1%, with a net loss and LAE ratio of 66.0% and a net expense ratio of 26.1%.
The company's own explanation is that it "managed growth with discipline in a competitive Direct market". CEO Alex Timm wrote that carriers "increased marketing spend while lowering prices" and that Root plans to "pursue growth only when it meets our target returns" (Q2 2026 letter).
The recent trend, quarter by quarter
The quarterly tables in the letters show profit improving while premium growth stalled. Revenue was $349.4 million in the first quarter of 2025, $382.9 million in the second, $387.8 million in the third and $397.0 million in the fourth. It was $393.5 million in the first quarter of 2026 and $389.2 million in the second (Q1 2026 letter, Q2 2026 letter).
- Gross written premium. $410.8 million in Q1 2025, $346.2 million in Q2 2025, $387.2 million in Q3 2025, $361.6 million in Q4 2025, $389.0 million in Q1 2026 and $339.7 million in Q2 2026. The Q1 letter says early 2025 was lifted by news of impending tariffs.
- Net income (loss). $18.4 million in Q1 2025, $22.0 million in Q2 2025, a loss of $5.4 million in Q3 2025, $5.3 million in Q4 2025, a record $35.9 million in Q1 2026 and $25.4 million in Q2 2026.
- Net combined ratio. 95.6% in Q1 2025, 95.2% in Q2 2025, 102.1% in Q3 2025, 99.7% in Q4 2025, 91.4% in Q1 2026 and 92.1% in Q2 2026. Below 100% means underwriting profit.
- Premiums in force. $1,492.2 million at March 31, 2026 and $1,431.7 million at June 30, 2026.
- Marketing spend. Sales and marketing expense was $25.3 million in Q2 2026 versus $37.1 million in Q2 2025.
The Q3 2025 loss included $17.2 million of warrant compensation expense, which the letter ties to the Carvana integration. Net investment income was $5.0 million in Q2 2026 versus $9.4 million a year earlier, a smaller drag on revenue than the premium trend but worth watching.
What Root says it is doing about growth
- Distribution mix. Partnership and independent agent channels were approximately 51% of new writings in Q2 2026, up from approximately 44% a year earlier. In Q1 2026 the company said partnership new writings grew nearly 30% year over year.
- New state. It launched in New Jersey in Q2 2026, bringing Root to 37 states and more than 80% of the U.S. population.
- New partner. It announced a partnership with Jerry, an insurance shopping platform.
- Pricing. It expects to launch its next-generation pricing model in the fourth quarter, which it says should improve segmentation, customer lifetime value and rate competitiveness.
- Capital. It repurchased more than $20 million of shares under a $75 million authorization and refinanced $200 million of debt with a term loan led by The Huntington National Bank. The Q1 letter says Root is in a position of excess capital.
- No guidance. The Q1 letter says "We do not provide short-term guidance", so there is no company forecast to measure these efforts against.
Our analysis: how Root could restart premium growth
- Spend where the margin allows. A Q2 2026 net combined ratio of 92.1% and Q1 2026 of 91.4% suggest room to buy more growth. Root says it will grow only at target returns, so the question is whether its acquisition targets are set tightly enough that profitable customers are being passed up. We would test higher direct marketing in the segments with the best lifetime value rather than lifting spend across the board.
- Make the new pricing model the growth lever. Root says the fourth-quarter model should improve rate competitiveness. If direct rivals are cutting prices, sharper risk selection is the way to match them where it is profitable and decline where it is not. We would watch the first two quarters after launch for policies in force and premiums per policy together.
- Keep shifting toward partners and agents. These channels already supply a rising share of new writings and are less exposed to bidding wars for search clicks. We would add more embedded partners at the point of purchase, like the Carvana and Jerry relationships, and invest in making Root easy to quote in the comparison tools independent agents already use.
- Add states and fill the product shelf. At 37 states, much of the remaining headroom is in new states and in selling more to existing customers. The letter lists renters insurance only in a limited set of states, so cross-selling a second product to the base is a possible lever if the unit economics hold.
- Separate premium per policy from volume. Premiums per policy fell to $1,479 from $1,616 a year earlier while policies in force rose 6%. If that reflects deliberate price cuts, it is a trade of price for volume that should show up as retention and lifetime value. If it reflects mix, the story is different. Investors should ask which.
- Use excess capital with a clear rule. Buybacks and growth compete for the same dollars. We would publish a simple hurdle rate for each so that outsiders can tell whether growth has been under-funded.
Questions people ask
What was Root's revenue in the second quarter of 2026?
Total revenue was $389.2 million for the quarter ended June 30, 2026, up 2% from $382.9 million a year earlier (Q2 2026 letter).
Is Root Insurance profitable?
Yes in the first half of 2026: net income was $35.9 million in Q1 and $25.4 million in Q2. It posted a loss of $5.4 million in Q3 2025 (Q2 2026 letter).
Why did Root's gross written premium fall?
The company points to a competitive Direct market in which carriers raised marketing spend and cut prices, and says it is pursuing growth only when it meets target returns (Q2 2026 letter).
How many policies does Root have in force?
483,921 at June 30, 2026, up 6% from a year earlier but down from 495,429 at March 31, 2026 (Q2 2026 letter).
Sources
- Root, Inc. Q2 2026 shareholder letter (SEC Exhibit 99.1) · Q2 2026 revenue, net income, premiums, policies in force, ratios, channel mix, strategy
- Root, Inc. Q1 2026 shareholder letter (SEC Exhibit 99.1) · Q1 2026 results and quarterly series back to Q1 2025
Figures come from the cited filings as read on October 31, 2026, and Root's later results may differ. We are not affiliated with Root, Inc. Our analysis is opinion and not investment advice.
Top photo: Paul Wasneski / Public domain via Wikimedia Commons