Inside Root’s IPO filing

Last night, Root filed to go public, adding a second name to the insurtech IPO rolls in 2020.

Lemonade was first out the gate this summer, taking its rental and home insurance business public at an attractive valuation, compared to its revenues and margins as we traditionally understand them. Wall Street was enticed by its growth and burgeoning consumer brand, according to one insurtech executive TechCrunch spoke to earlier this week.

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Root, in contrast, is focused on the automotive market, a lucrative space with a host of incumbent players and startup rivals like MetroMile and Clearcover. Reuters was first to report that Root was looking to file, after which we dug into the company’s reportedly-targeted $6 billion IPO valuation.

We found that a $6 billion price tag, knowing what we did then, seemed reasonable. This morning we’ll fact-check our work.

Let’s get into the IPO filing and find out what we can. We want to know how quickly Root is growing, how much its economics have improved over time and how healthy the company is going into its public offering.

Inside Root’s IPO filing

Root has two lines of business in 2020: auto insurance and rental insurance. Akin to how fintech startups will offer you a debit card, and later offer, say, equities trading, insurance startups also want to cross-sell their existing customer base.

Historically, however, Root has been automotive-insurance focused, and its recent addition of rental insurance has yet to constitute a material portion of its in-market premiums. Still, here are the insurance-specific numbers that you should know, before we get into the regular financial results:

• Root’s active automotive policies grew from 111,736 in 2018 to 281,310 in 2019. That’s just under 152% growth on a year-over-year basis.
• And, Root’s active automotive policies grew from 220,536 on June 30, 2019, to 334,327 on June 30, 2020. That’s just under 52% growth on a year-over-year basis.

As Root has scaled, its economics have improved as well. Here’s a raft of key numbers of how Root’s overall business has gotten better over time:

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