# Root: a 92% combined ratio becomes 96% once reserve releases are removed ROOT, Nasdaq. Published October 20, 2026. Price is an intraday trade at about 8:15 pm Prague time (2:15 pm New York) on October 20, 2026, during the regular session; the October 19 close was $52.32. ## Verdict: REDUCE at $52.45 At $52.45 the shares trade 36.5% above my Base value of $38.41, a downside of 26.8%, and at 2.5 times reported book value. The turnaround is real: Root earned $61.3 million in the first half after years of losses. But 46% of first half pretax profit came from releases of old claim reserves, a combined ratio of 91.7% becomes 95.7% without them, and the 2026 tax bill is close to zero. Confidence is C and the required margin of safety is 45%, which puts the maximum buy price at $21.13. Reduce for holders, watchlist for new money. Third quarter results on November 4 are not in this analysis. - Bear value: $12.41 - Base value: $38.41 - Bull value: $80.11 - Downside to base value: -26.8% - Maximum buy price: $21.13 - Required margin of safety: 45% - Price to reported book value: 2.48 times - Pretax profit from reserve releases, H1: 46% - Combined ratio, reported / without releases: 91.7% / 95.7% - Modeled annual return over ten years: 8.3% - Business quality: 56/100 - Valuation score: 28/100 - Confidence: 14/25, grade C Root reported a net combined ratio of 91.7% for the first half of 2026. The combined ratio is claims plus costs divided by premiums earned, so anything below 100% means the insurer made money on policies alone. But $28.5 million of that came from releases of reserves set aside for earlier years, which is 46% of the $61.7 million pretax profit. Take the releases out and the ratio is 95.7%. Still profitable, but a different business from the one in the headline. At $52.45, an intraday trade at about 8:15 pm Prague time (2:15 pm New York) on October 20, 2026, the shares trade 36.5% above my triangulated Base value of **$38.41**, a downside of 26.8%. The Bear value is $12.41, 76.3% below the price, and the Bull value of $80.11 is 52.7% above it. Confidence is grade C (14/25), the required margin of safety (MOS) is 45%, and the maximum buy price is **$21.13**. The verdict is Reduce for holders and a watchlist for new money. Valuation route: a U.S. personal auto insurer, so I value the capital it holds, not its software or its cash flow. Primary method: residual income, which values the common book value plus the profit earned above a 13% cost of equity, with tax losses added once. Secondary method: 11 times normalized earnings. Weights are 70% and 30%. Classification: standard company, an improving insurer, no compounder premium. ## What Root is Root sells car insurance in the United States and prices it with data from phones and from the car, a method it calls telematics. It sells through its own app, through independent agents and through partners that offer cover at the point of sale, the best known being Carvana. It competes with the large national insurers and with every other company that has bought its way into the auto market, and prices there are set by competition more than by technology. The company lost money for years, then earned $40.3 million in 2025 and $61.3 million in the first half of 2026. Net combined ratios were 133.2% in 2023, 96.4% in 2024, 98.2% in 2025 and 91.7% in the first half of 2026. Three years of clear improvement is not the same as a full cycle, and auto insurance is a cyclical business: when claims costs rise faster than prices, margins disappear within a few quarters. Growth is slowing while profits rise. Second quarter gross written premium fell 1.9% to $339.7 million, and net earned premium rose only 3.0% in the quarter against 7.9% for the half. Net premiums grow faster than gross ones because Root now passes less risk to reinsurers and keeps 98.9% of what it writes. Keeping more risk means holding more capital behind it. The 51% share of second quarter new business from partners and independent agents is not Carvana alone, and Carvana's agreement now runs at least through August 2028. ## The latest results | Latest reported period | Result | | --- | --- | | Second quarter gross written premium | $339.7 million, down 1.9% from $346.2 million | | Second quarter net earned premium | $363.5 million, up 3.0% | | Second quarter net income | $25.4 million, $1.49 a diluted share | | First half net income | $61.3 million, $58.3 million after preferred shares | | First half net combined ratio | 91.7% reported, 95.7% without prior year releases | | First half prior year reserve releases | $28.5 million, 46% of pretax profit | | Policies in force, June 30 | 483,921, up 6.2% | | Common equity, June 30 | $327.9 million, against $284.3 million at year end | | Cash and cash equivalents, June 30 | $509.6 million, against $669.3 million at year end | | Debt | $197.8 million, refinanced into a new bank loan in the second quarter | The company gives no numerical guidance for 2026. The next generation of its pricing model is expected to launch in the fourth quarter, and third quarter results come after the close on November 4 (the call is at 5 pm New York time, 11 pm in Prague). None of that is in this analysis. ## How much of the profit is repeatable For an insurer the number that matters is profit available to common shareholders after claims, taxes and the claims of preferred shares. I rebuilt it from the first half, removing what will not repeat and adding back what should not recur. | $ million, first half 2026 | Amount | | --- | --- | | Pretax income as reported | 61.7 | | Remove releases of prior year reserves | -28.5 | | Add back loss on debt refinancing | 4.9 | | Add back write-off of an investment | 4.4 | | Remove realized investment gain | -0.1 | | Recurring pretax income | 42.4 | | Annualized | 84.8 | | Interest at a normal run rate (extra cost) | 4.3 | | Normalized annual pretax income | 89.1 | | Tax at a normal 24% | -21.4 | | Charge for the preferred shares | -6.3 | | Normalized common earnings | 61.4 | That is 50% of the annualized headline net income of about $123 million. The gap has three parts. Releases are a gift from earlier caution, not a repeating source of profit. The reported tax rate in the half was 0.6%, because Root still shelters income with old losses, and I value those losses separately and only once. And the preferred shares carry a claim ahead of the common. Against an opening common book value of $313.4 million, normalized earnings give a 19.6% return on equity. Releases are not a sign of bad accounting. They can mean past estimates were prudent. But capitalizing them as permanent earnings would count the same old caution twice. The shareholder letter confirms the gap indirectly: the gross loss ratio was 56.6% for the half, while the ratio for claims from the current accident period was 59.7%, so prior year releases lowered it by about three points. ## Shares, preferred stock and the tax losses | Item | Amount | | --- | --- | | Class A common shares, July 29 | 13,687,016 | | Class B common shares, July 29 | 1,806,236 | | Total common shares | 15.49 million | | Market value at $52.45 | $812.6 million | | Reported common equity per share | $21.16 | | Preferred stock, carrying value / redemption claim | $112.0 million / $126.5 million | | My opening common book value | $313.4 million | | Share count used in the valuation | 16.2 million | Both share classes have the same economic rights, so I count both. Class B only carries ten votes a share, which is a governance point and not a value point. My valuation uses 16.2 million shares, a conservative allowance above the 15.49 million outstanding for employee awards and options. I do not assume further buybacks after June, because a buyback uses cash and reduces book value by the same amount. The preferred shares sit ahead of the common holders. Their carrying value of $112.0 million is already outside the $327.9 million of common equity, so I reserve only the extra $14.5 million needed to reach the $126.5 million claim, and I charge $6.3 million a year for a dividend that may start after the fifth anniversary. That charge is an estimate of a conditional cost, not a coupon being paid now. Without it, the Base would be higher, as the stress test shows. Carvana also holds warrants over 7.2 million shares with strike prices that start at $180, far above any value here, so I add no dilution for them. Root's compensation, including share awards and warrant costs to partners, stays in expenses as a real cost. The $200 million loan was refinanced, not added, so it creates no new cash: it matures in May 2029 and the disclosed saving is about $4.5 million a year. Root has large tax losses. The 10-K shows a federal pool of $1,284.7 million at the end of 2025, but not all of it can be used freely, and how much can be used each year is an open question. I assume $600 million of usable tax base, at most $75 million used a year, valued at the 21% federal rate. Savings are held back for three years and released from year four. That adds $4.16 a share, discounted at 13%. Without the tax losses the Base falls to $34.25. A word on regulated capital. An insurer's profit does not all reach shareholders, because regulators require capital to stay inside each insurance subsidiary. At the end of 2025 the three U.S. subsidiaries held $247.0 million of statutory surplus against much smaller minimum requirements, but I could not verify the current risk based capital ratios, and I do not use a solvency figure from a broker app. That gap is one of the reasons for Confidence C. ## The primary valuation: residual income on book value Residual income starts from the capital shareholders already own and adds the present value of profit above the required return. Opening common book is $313.4 million. I use a 13% cost of equity because this is a young, cyclical profit record in a competitive market. The return on equity starts at 19.6% and fades from 20% to 15% over ten years, which is deliberately above the cost of equity for a long time. Earnings are fully retained for three years and 60% retained afterwards, so book value grows with the business. | Year | Opening book, $m | Return on equity | Earnings, $m | Paid out, $m | Closing book, $m | | --- | --- | --- | --- | --- | --- | | 1 | 313.4 | 19.6% | 61.4 | 0.0 | 374.8 | | 3 | 449.8 | 20.0% | 90.0 | 0.0 | 539.7 | | 5 | 601.2 | 18.0% | 108.2 | 43.3 | 666.2 | | 7 | 734.1 | 16.5% | 121.1 | 48.5 | 806.8 | | 10 | 966.5 | 15.0% | 145.0 | 58.0 | 1,053.5 | At the end of year ten I use a terminal return on equity of 15% and growth of 3%, which gives a price to book of (15% - 3%) divided by (13% - 3%), or 1.20 times. I do not assume that a mediocre insurer keeps a permanent premium to book. Core value is $31.99 a share, the finite tax losses add $4.16, and the primary Base is **$36.14**. In cash terms, the investor receives about $78 a share of terminal stock value in year ten, which is worth $22.99 today and 64% of the total. That share is high and it is the main duration risk of the model. A growth question hides inside this table. If the retained capital simply sits as cash, the return on equity falls and the table is wrong. To earn the projected profit at a 95.5% combined ratio, Root's net earned premium would have to rise from an annualized $1.45 billion today to about $1.54 billion in year one, $2.27 billion in year three and $3.48 billion in year ten (my reverse calculation). That is a strong reacceleration after a quarter when gross premium fell. ## The secondary valuation: 11 times normalized earnings The second method does not use the return path. It builds a normal year from premiums: net earned premium of $1,450 million, a normalized combined ratio of 95.5%, $30 million of investment income, $3.2 million of other income and $13.5 million of interest, then 24% tax and the preferred charge. That gives common earnings of $58.2 million, or $3.59 a share. I apply 11 times, a figure I chose for a competitive, capital constrained insurer and not a peer median, and add the same $4.16 of tax losses. The secondary Base is **$43.70**. | Normalized annual earnings | Bear | Base | Bull | | --- | --- | --- | --- | | Net earned premium, $m | 1,350 | 1,450 | 1,650 | | Combined ratio | 98.5% | 95.5% | 93.5% | | Investment and other income, $m | 30.0 | 33.2 | 39.0 | | Interest, $m | 15.0 | 13.5 | 12.5 | | Common earnings, $m | 20.5 | 58.2 | 95.3 | | Earnings per share | $1.26 | $3.59 | $5.88 | | Multiple chosen | 8 times | 11 times | 14 times | | Tax losses per share | $1.10 | $4.16 | $7.10 | | Secondary value per share | $11.21 | $43.70 | $89.48 | Fees are already netted against costs in Root's combined ratio, so I do not add them again. One point of combined ratio is worth $0.68 of earnings per share. The methods are not truly independent: both depend on claims, taxes and the same capital claims, so their agreement does not raise my confidence. ## A price check against history A secondary price source shows a close of $72.23 at the end of 2025. Against year end common equity of $284.3 million and about 15.5 million shares, that was 3.9 times book. Today it is 2.5 times reported book, so the shares have fallen a long way, which does not by itself make them cheap. I could not build a clean five year history of price to book matched to what was known at each date, and the profit record is too short to make a median meaningful, so history gets no weight in the value. The screen figures do not reconcile either. The broker page shows earnings of $3.72 a share with a P/E of 14.81, but $52.45 divided by $3.72 is 14.10. Its PEG of 3.66 has no stated earnings basis, and its solvency ratio of 5.62% is not a regulatory capital ratio. I use none of them. On my normalized earnings of $3.79 a share (61.4 over 16.2 million) the stock is 13.8 times, and on the secondary build's $3.59 it is 14.6 times. ## Triangulating the values | Value per share today | Bear | Base | Bull | Weight | | --- | --- | --- | --- | --- | | Residual income plus tax losses | $12.93 | $36.14 | $76.09 | 70% | | 11 times normalized earnings plus tax losses | $11.21 | $43.70 | $89.48 | 30% | | Triangulated value | $12.41 | $38.41 | $80.11 | 100% | The Base methods differ by 18.9% (difference over midpoint), under the 20% warning level, but narrowly. I weight the book based method more because capital is the binding constraint for an insurer. A corporate free cash flow multiple would be misleading here: an insurer holds other people's money until claims are paid, so operating cash flow can look strong before the losses arrive. ## What the price already assumes | What it would take to match $52.45 | Needed | My Base | | --- | --- | --- | | Return on equity in every year, residual income model | +3.3 points | 19.6% falling to 15% | | Which means year one return on equity of | 22.9% | 19.6% | | And terminal return on equity of | 18.3% | 15.0% | | Or a normalized combined ratio, secondary model | 94.3% | 95.5% | These are not impossible. A combined ratio of 94.3% is 1.2 points better than my Base and 1.4 points better than the 95.7% of the first half without releases. But the price needs reserve independent underwriting to hold, and returns above 18% to survive a doubling of the capital base. Either is reachable in a good run of pricing. Neither is the central case from a company with three profitable years. ## Bear, Base and Bull | | Bear | Base | Bull | | --- | --- | --- | --- | | Net earned premium | $1,350m | $1,450m | $1,650m | | Normalized combined ratio | 98.5% | 95.5% | 93.5% | | Return on equity | 10% to 12% | 19.6% fading to 15% | 26% fading to 18% | | Cost of equity | 15% | 13% | 11.5% | | Usable tax losses / yearly cap | $150m / $35m | $600m / $75m | $1,000m / $110m | | Earnings multiple | 8 times | 11 times | 14 times | | Residual income value | $12.93 | $36.14 | $76.09 | | Earnings multiple value | $11.21 | $43.70 | $89.48 | | Value per share today | $12.41 | $38.41 | $80.11 | | Against $52.45 | -76.3% | -26.8% | +52.7% | | Ten year annual return from $52.45 (primary model) | -2.1% | 8.3% | 16.3% | The Bear is a joint stress: weak premium growth, a 98.5% combined ratio, returns below the cost of equity and a higher discount rate. It does not also add a new reserve shortfall. The Bull must lift growth and underwriting at once, and its terminal value crosses the $162 level at which the preferred shares convert, so I rebuilt that year as if converted. That cut the Bull primary by $2.17 a share. I do not attach probabilities to the three cases. ## Sensitivity and the cases that flip the verdict | Triangulated value per share | Returns 2 points lower | Base path | Returns 2 points higher | | --- | --- | --- | --- | | Cost of equity 11% | $39.83 | $47.57 | $56.85 | | Cost of equity 13% | $32.95 | $38.41 | $44.94 | | Cost of equity 15% | $28.49 | $32.52 | $37.34 | Only the most favorable corner, an 11% cost of equity with returns two points higher, puts the value above the price, at $56.85. A two point change in the cost of equity moves the Base by $6 to $9 a share, which is why I show the table. | Case | Triangulated value | Against $52.45 | | --- | --- | --- | | Base | $38.41 | -26.8% | | No value for tax losses | $34.25 | -34.7% | | No preferred dividend charge | $42.43 | -19.1% | | Only the 15.49 million outstanding shares | $40.16 | -23.4% | | No extra reserve for the preferred claim | $39.45 | -24.8% | | Reserves 5% too low (about $23.5m, or $1.45 a share) | $36.73 | -30.0% | | Three months of unreported profit added to book | $39.51 | -24.7% | | Full reported federal tax losses usable | $39.92 | -23.9% | | First half low tax profit held for three years | $47.09 | -10.2% | | Bull operations at the Base 13% cost of equity | $69.72 | +32.9% | | Full Bull | $80.11 | +52.7% | | Bear returns, 15% cost of equity, no tax losses | $28.71 | -45.3% | Be clear about what this shows. In 10 of the 12 cases the shares are worth less than $52.45. The two cases where they are not are the Bull ones, which need both better underwriting and a larger, profitable premium base. The cautious verdict depends on durability and does not survive every defensible optimistic case. That is why this call sits close to a line, and I want to say so up front: the Base is 26.8% below the price, which my rules classify as Slightly Overvalued, a band where both Hold and Reduce are allowed. Hold is a reasonable alternative reading of the same numbers. It becomes the call if reserve independent combined ratios stay near 94% with disclosed capital headroom, or if a cost of equity near 11% becomes defensible. I chose Reduce because the Bear is 76.3% below the price against a Bull 52.7% above it, Confidence is C, and the price needs returns 3.3 points above my central path. ## How the buy price is set Confidence C calls for a margin of safety of 35% to 50%. I use 45%, near the upper end, because the through cycle record and the current regulatory headroom are the hardest things to verify. I add nothing on top: claims cycles, debt, reserves, partners, tax losses and terminal value are already in the scenarios. The maximum buy price is $38.41 x (1 - 45%) = **$21.13**. Three numbers answer different questions: what the shares are worth ($38.41), the return from buying at $52.45 and holding the primary model's cash flows for ten years (8.3% a year), and the price that gives a 15% annual return on those cash flows ($31.10). The $21.13 is a watchlist level for an intact thesis, not a prediction. If the price falls because claims or capital deteriorate, the valuation has to be redone from scratch. ## The dividend Root pays no common dividend and I assume none soon. Money moving from an insurance subsidiary to the parent company is not a payment to shareholders. My model starts distributing capital in year four, at $2.53 a share, a 4.8% yield on today's price. That is an assumption about what the business could return if it grows as modeled, and it needs regulatory room and the board's intent. Buyback authority of $75 million exists, but an authorization is not money returned. ## Reasons to own - **The turnaround is genuine.** Root went from losses to a $61.3 million first half profit, and even without reserve releases the half had a positive underwriting margin. - **Partners lower acquisition cost.** Carvana's agreement now runs at least through August 2028, and partners plus independent agents brought about 51% of second quarter new business. - **Pricing technology is a plausible edge.** Better risk selection from data can sustain excess returns, if claims results confirm it. - **The balance sheet is better.** The refinancing cut annual interest by about $4.5 million, and the company holds $509.6 million of cash. - **The tax losses have value.** I credit them once, as a finite asset. ## Main risks - **Reserve releases fade.** If earlier estimates were not prudent, or releases stop, earnings fall toward my normalized $61 million and below. - **Claims inflation and price competition.** A combined ratio drifting from 96% to 100% removes most of the underwriting profit. - **Growth that costs money.** Gross premium fell 1.9% in the second quarter. Reaccelerating means marketing and commissions, which can absorb the expense savings. - **Trapped capital.** Subsidiaries must keep regulatory capital, so profit does not all reach common shareholders. I could not verify current ratios. - **Preferred and employee claims.** The preferred shares rank first, and compensation and warrants dilute the common holders. - **Partner dependence.** A weaker Carvana relationship would hit new business directly. - **Rate sensitivity.** A two point rise in the cost of equity takes about $6 off the Base. ## Management execution | Component | Score | Evidence | | --- | --- | --- | | Operating execution | 4 / 5 | Profitability achieved and expenses lowered | | Disclosure | 4 / 5 | Claims roll-forwards and reconciliations let investors check the numbers | | Capital allocation | 3 / 5 | Cheaper debt, but buybacks use real capital | | Alignment and governance | 2 / 5 | Founder voting structure and complex compensation | | Total | 13 / 20 | Improving; premium credibility not yet earned | The things I would watch are profit that depends on releases, bonuses tied to adjusted EBITDA while dilution rises, and capital returned before regulatory headroom is clear. These are conditions to monitor, not accusations. The pricing model update due in the fourth quarter is the next test of the technology claim. ## Stock Analyza scorecard | Business quality | Points | Maximum | | --- | --- | --- | | Moat and pricing power | 10 | 20 | | Return versus cost of capital | 13 | 20 | | Balance sheet and resilience | 9 | 15 | | Earnings quality | 7 | 15 | | Reinvestment runway | 9 | 15 | | Management and capital allocation | 6 | 10 | | Dilution and governance | 2 | 5 | | Total | 56 | 100 | On the insurance scorecard Root scores 4/12: the modeled return above the cost of equity earns full marks, but there is no long record of book value growth, no verified current regulatory ratio or rating, and no through cycle underwriting history. The valuation score is 28/100: 9/40 for the discount to value, 1/20 for protection against the Bear, 9/15 for agreement between methods, 3/10 for history, 4/10 for what the price implies and 2/5 for data quality. ## Confidence score | Component | Points of 5 | | --- | --- | | Data quality and provenance | 4 | | Business predictability | 2 | | Valuation robustness | 3 | | Accounting transparency | 3 | | Scenario dispersion | 2 | | Total, grade C (13 to 17) | 14 of 25 | ## What I would watch from here For a Reduce call the colors describe the thesis, not the share price. Green means the Reduce case holds. Red means it breaks and the call moves toward Hold, so strong results show up as Red here, and that is good news for the stock. ### The Reduce case holds - A combined ratio without prior year releases that stays above 95%. - Gross premium still shrinking while net premium grows only because less risk is ceded. - Releases staying above a third of pretax profit. ### Watch closely - A release adjusted combined ratio between 94% and 95%, or a strong quarter that still leans on releases. - Buybacks or distributions announced before capital ratios are disclosed. - A preferred dividend turning into a cash payment. ### The call would move to Hold - A release adjusted combined ratio at or below 94.3%, the level the price needs, for several quarters. - Profitable gross premium growth with retention holding. - Disclosed regulatory capital headroom and book value per share rising after all compensation and buybacks. ## What would change the call - **Toward Hold: underwriting without releases.** Several quarters near 94% would show the profit is there before old reserves are counted. - **Toward Hold: capital room.** Disclosed headroom and permission to return capital. - **Toward Sell: underwriting losses.** A release adjusted ratio above 100% for several quarters with no price response, or regulatory or covenant limits that block cash from reaching common holders. ## Stress test and independent check I rebuilt the model from its stated inputs with separate code and reproduced: the normalized earnings bridge ($61.39 million, 19.59% return on equity); the ten year residual income path, including the primary Base of $36.14, the $31.99 core value, the $4.16 tax loss value, the $78.03 terminal stock value and its 64% share; the secondary Bear, Base and Bull values; the three blends ($12.41, $38.41, $80.11); the 18.9% difference; the 8.3% return and the $31.10 entry for 15%; the $21.13 buy price; the reverse requirements (+3.30 points of return, a 94.3% combined ratio); the required premium path ($1,542 million, $2,271 million, $2,688 million and $3,478 million); the nine cell rate table; and the robustness cases for no tax losses, basic shares only, no preferred top-up, three months of extra earnings, 5% reserves and the Bear counter case. I found no construction error. Several items I could not reproduce exactly. The Bull primary value of $76.09 depends on a terminal conversion adjustment that I did not rebuild; I checked only its blend with the secondary value. The case without a preferred dividend gave $46.29 in my run against $42.43 in the original, because the way the saved charge flows through the model is not fully specified, and either way the value stays below the price. Full use of the reported tax losses gave $39.19 under my assumed annual cap, against $39.92. And I did not rerun the two headline extrapolation cases ($47.09 and $69.72). From public documents I confirmed the share count by class, common equity of $327.9 million, the preferred carrying value of $112.0 million and redemption amount of $126.5 million, first half pretax income of $61.7 million, net income, net earned premium, interest, the refinancing loss, the investment write-off, operating cash flow and capitalized software, the second quarter premium and income figures, the 91.7% and 92.1% combined ratios, policies in force, the cash and debt balances, the repurchase authorization, the Carvana extension and the November 4 reporting date. I could not re-read the $28.5 million release figure, which the letter does not disclose and the 10-Q reserve note holds; the preferred dividend terms and conversion price; the statutory surplus table; net loss reserves of $470.3 million; or the outside regulated cash. Those come from the supplied analysis. Three further points. The price is an intraday trade; the October 19 close was $52.32, and the verdict is the same at either price. The balance sheet date is June 30, so profit earned since then is not in book value; three months of it would lift the Base to $39.51. And the 13% cost of equity, the 24% normal tax, the usable tax losses and the 11 times multiple are my estimates, not market data. Main data limits: I do not know current regulatory capital ratios, how much of the tax losses can really be used, or whether the preferred dividend will be paid in cash. These are why Confidence is C. ## Final verdict: reduce at $52.45 Root has done what few auto insurers manage: it has turned a loss making company into one that earns a real return on its capital. But the headline numbers flatter the result, and a price of 2.5 times book already assumes the improvement lasts through a full pricing cycle with returns 3.3 points better than my central case. The buy ceiling of $21.13 is 60% below the price. **Verdict: REDUCE at $52.45, do not add, watchlist for new money. Price $52.45, triangulated Base value $38.41, downside 26.8%, Confidence C (14/25), required margin of safety 45%, maximum buy price $21.13.** For holders Reduce means trimming, not leaving: how much depends on your cost, position size and taxes, which I do not know. For new money it means waiting, either for a lower price or for several quarters of strong results that do not rely on reserve releases. The November 4 report is the first chance to see one. ## More analyses on Patreon This analysis is free. Premium members get every in-depth analysis, the full archive and a vote on which stocks get analyzed next: https://www.patreon.com/stockanalyza ## Sources Primary sources include Root's [second quarter 2026 quarterly report on Form 10-Q](https://www.sec.gov/Archives/edgar/data/1788882/000178888226000061/root-20260630.htm), the [second quarter 2026 shareholder letter](https://www.sec.gov/Archives/edgar/data/1788882/000178888226000060/q22026shareholderletter.htm), the [2025 annual report on Form 10-K](https://www.sec.gov/Archives/edgar/data/1788882/000178888226000014/root-20251231.htm), the [refinancing and repurchase announcement](https://ir.joinroot.com/news-releases/news-release-details/root-lowers-cost-capital-through-refinancing-and-announces-75/), the [Carvana agreement extension](https://ir.joinroot.com/news-releases/news-release-details/root-insurance-and-carvana-extend-embedded-insurance-agreement), the [Florida rate reduction](https://ir.joinroot.com/news-releases/news-release-details/root-reduces-auto-insurance-rates-15-florida-citing-impact-legal), the [third quarter reporting schedule](https://ir.joinroot.com/news-releases/news-release-details/root-inc-schedules-conference-call-discuss-third-quarter-2026), the [2026 proxy statement](https://ir.joinroot.com/static-files/af61c673-cb42-4502-ad51-2bc54c06281f) and the [issuer quote page](https://ir.joinroot.com/stock-information/stock-quote-chart). The end of 2025 price comes from a secondary source, [historical prices](https://www.quiverquant.com/stock/ROOT/historical-prices/), and was used only as context. The reference market price is $52.45, an intraday trade at about 8:15 pm Prague time on October 20, 2026 during the regular session; the October 19 close was $52.32 on the [quote page](https://stockanalysis.com/stocks/root/). Per share values use 16.2 million economic shares. The return path, cost of equity, normal tax rate, usable tax losses, combined ratios and earnings multiples are analytical estimates, not company guidance or consensus. **Disclaimer.** This analysis is provided solely for research and educational purposes. It is not personalized investment, financial, legal or tax advice. Values are estimates, not forecasts or trading instructions. Root is exposed to claims cost inflation, reserve development, price competition, regulatory capital limits, dependence on distribution partners, and the claims of preferred shareholders. Investors can lose part or all of their invested capital. Method: Master Investment Analysis Framework v3.4, adapted for insurance. Approach: residual income on common book value with a normalized earnings multiple cross-check and a separate finite value for tax losses. Confidence: C/14. Data checks: passed with warnings. Conditional research only. Open data gaps: current regulatory capital ratios, usable tax losses and the timing of preferred dividends.