New investors DST Global and Coatue Management are leading the investment of $350 million, with all the company’s existing backers also planning to participate, the person said. The deal is expected to be completed this month, the person added.
Based in Columbus, Ohio, Root Insurance has grown by selling auto insurance through a mobile app in dozens of states. It is one of the largest of a crop of venture-backed tech-enabled insurance carriers, such as Lemonade Insurance Co. and MetroMile Inc.
Root Insurance earned $133.4 million in insurance premiums in the first half, 12 times the amount from a year earlier, according to regulatory filings available through S&P Global Market Intelligence.
Like many startup insurance carriers, the company also has been spending significant amounts paying out claims. It recorded $126.6 million in direct losses this year through June, the filings show.
Root Insurance has improved its ratio of losses to premiums earned, its filings show. But the loss ratio remains high for the industry, Matteo Carbone, founder and director of the IoT Insurance Observatory, an insurance-industry-research firm, said in an interview.
Founded by Alex Timm and Dan Manges, Root Insurance has raised $177 million before this round from venture investors including Drive Capital, Ribbit Capital, Redpoint Ventures and others, according to PitchBook Data Inc. It was valued at $1 billion in a 2018 venture round.
Mr. Timm, Root’s chief executive officer, said the company’s loss ratio is “entirely expected for a new, young book of business.”
The company is in a challenging business, where capital needs are significant, with capital reserve requirements determined by regulators, and marketing budgets are often high due to competition for consumer attention from large companies like Geico and Progressive.