Root Inc. ROOT posted decent second-quarter 2026 results, with both the top and bottom lines improving year over year. The company witnessed improved in-force premiums and loss ratio.
Root is a technology insurance company focusing on the United States personal auto insurance market. It offers automobile and renters insurance products primarily through websites, mobile applications and partnership channels.
Shares of ROOT have gained 5.9% in the past three months, outperforming the Zacks S&P 500 composite but underperforming its industry and sector in the same time frame.
ROOT vs Industry, Sector, S&P 500 in 3 Months
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Shares of Lemonade Inc. LMND, its peer, have lost 4.4% in the past three months while those of Hippo Holdings HIPO, another peer, have rallied 17.7% in the same time frame.
Sneak Peek Into ROOT’s Q2 Results
Root generated $389 million of revenues, up 2% year over year and $44 million of adjusted EBITDA, up 16% year over year.
It exited the quarter with 0.484 million policies in force, up 6% year over year. Gross written premium of $340 million declined 2% while gross earned premium of $368 million declined 1% year over year as the company managed growth with discipline in a competitive Direct market.
Partnership and independent agent channels represented about 51% of new writings in the quarter, reflecting continued progress and diversifying growth beyond Direct.
Net underwriting margin improved 310 basis points year over year to 7.9%, equivalent to a 92.1% net combined ratio, driven primarily by continued expense discipline.
Net expense ratio improved 300 basis points year over year to 26.1%, while net loss and LAE ratio was 66%, broadly in line with the prior-year period.
Root bought back $20 million of shares under its $75 million share repurchase authorization.
ROOT Shares Are Expensive
The stock is overvalued compared with its industry. It is currently trading at a price-to-book multiple of 2.93, higher than the industry average of 1.52 but lower than the median of 4.44 over the past three years. It has a Value Score of A.
Image Source: Zacks Investment Research
ROOT shares are more expensive than HIPO but cheaper than LMND.
The Case for ROOT Stock
Root represents a differentiated opportunity in the $350 billion U.S. auto insurance market. Its mobile-first platform combines telematics and artificial intelligence to assess actual driving behavior, enabling more accurate underwriting, stronger risk selection and potentially lower loss ratios.
The company’s growth strategy centers on geographic expansion, broader distribution and deeper partnerships. Root aims to launch its products nationwide, increase policies in force, and make coverage accessible through direct, independent-agent, and embedded-insurance channels.
To strengthen its agency presence, Root has integrated with leading comparative rating platforms, including EZLynx and PL Rating. Its partnership business is also expanding across the automotive and financial-services sectors, while targeted customer-acquisition investments continue to support direct-channel growth.
Root’s financial performance has benefited from disciplined expense management, selective marketing and strong underwriting. Its gross loss ratio remains below the long-term target range of 60%–65%, giving the company flexibility to reduce prices selectively without sacrificing profitability. This margin improvement helped Root achieve its first full year of profitability in 2024.
Root’s five-part strategy will offer customers the lowest possible prices. It will enable the company to expand into every state, grow the independent-agency channel, scale embedded-insurance partnerships, and apply its AI capabilities to build a more efficient, automated marketing engine.
Muted Analyst Sentiment on ROOT
The Zacks Consensus Estimate for 2026 earnings indicates year-over-year improvement but that for 2027 indicates a year-over-year decline. ROOT has a Growth Score of A.
Image Source: Zacks Investment Research
The consensus estimate for 2026 and 2027 earnings has witnessed no movement in the last 30 days.
The consensus estimates for LMND and HIPO’s 2026 and 2027 earnings have witnessed no movement in the last seven days.
Parting Thoughts on ROOT Shares
Improved underwriting via telematics, lower loss ratios, efficient customer acquisition, and scaling profitable policies through data-driven pricing and retention position ROOT for long-term growth. Its VGM Score of A instills confidence.
Given its premium valuation and muted analyst sentiment, it is better to adopt a wait-and-see approach for this Zacks Rank #3 (Hold) stock now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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