Root top insurer on Wall Street as turnaround continues

Insurance technology companies Root Inc. and Oscar Health Inc. are among the best-performing listed US insurers on Wall Street so far in 2024 as various technology-focused insurers refocus their business.

Root's stock value has jumped 328.5% since Jan. 2, the first day of trading in 2024, growing to $44.86 per share by the close of trading on June 12 from $10.47 a share.

The insurance technology (insurtech) company's success vastly outpaced both the S&P 500 and S&P Insurance index, which rose 14.30% and 11.68%, respectively, during the same period.

Root's rise began in February following the release of its fourth-quarter 2023 earnings, described as "the best quarter the company has ever produced across almost every metric in the business" by CEO Alex Timm during a conference call.

The rise follows a challenging 2023 for Root and other insurtechs as investor confidence waned in a sector beset by underwriting and profitability issues.

In a March interview with S&P Global Market Intelligence, Timm said he had learned not to look at the stock market to tell him things about business.

"I think we've been deeply misunderstood by the market for quite some time, and we've tried to stay focused and disciplined on the fundamentals of our business, driving near best-in-class industry loss ratios, disciplined growth and expense management," Timm said. "We want to focus on our customers, and I believe that the market eventually figures it out."

Root did not respond to a request for comment.

A healthy rise

Although the 109.5% rise in Oscar Health's stock value may not have been as substantial as Root's, it came after a similarly strong quarter.

Founded in 2012, the managed care insurtech had never reported positive net income. It broke that streak during the first quarter, posting $177.4 million in net profits, a $217.1 million improvement year over year, according to an earnings release.

Much of this growth was driven by membership growth in Affordable Care Act (ACA) marketplace plans offered by Oscar, according to comments made by CEO Mark Bertolini during a first-quarter earnings call.

"The ACA now has more than 21 million people enrolled and is the fastest-growing health insurance segment, driven by the gig economy, consumerization and government policies. The market has reached a size that makes it a permanent, attractive option, supporting our country's most diverse and vulnerable populations, filling a critical gap in the insurance market," Bertolini said.

Other insurers that have performed well so far this year include Kingstone Cos. Inc., with a 140.3% jump in value; Oxbridge Re Holdings Ltd., which has risen 113.3%; and SelectQuote Inc., which has increased 112.7%.

Poor performers

Among the worst performers year to date were other insurtechs and two China-based insurers.

Beijing-based Cheche Group Inc., which operates an auto insurance technology platform, saw the largest drop among insurers from the start of the year, with its stock value falling 86.5% to 87 cents per share by June 12 from $6.45 per share on Jan. 2.

Fanhua Inc., based in Guangzhou, China, was also among the worst performers year to date, falling 52.8% in value to $3.02 per share from $6.40 per share.

During a fourth-quarter 2023 earnings call in March, Fanhua CEO and founder Yinan Hu described 2023 as "a year of challenges and transformation for the entire life insurance industry in China."

"The performed changes in regulatory policies, particularly the downward adjustment of the pricing rate and implementation of fire and actual fee consistency requirement in the bancassurance channel presented [an] unprecedented test for the industry," Hu said. "Fanhua was no exception."

Other insurers that posted substantial declines thus far in 2024 are Reliance Global Group Inc., whose stock value has decreased 57%; Marpai Inc., which has fallen 49.9%; and eHealth Inc., which has dropped 41.5%.