Root Inc

Previous wording

To scale the business, we aim to drive new customer growth by capitalizing on our two distribution channels: direct and partnerships. In both channels we seek to optimize unit economics. Loss ratios for customers in their initial term are generally higher than in subsequent terms. As a young insurance company, compared to our peers, our results are disproportionately weighted toward new customers. We believe our data- and technology-driven approach allows for rapid response to macroeconomic trends through quick, appropriate rate actions. Our ability to continually enhance our underwriting and segmentation capabilities has contributed to improvement in our gross loss ratios. Our marketing spend is grounded in a disciplined data-science approach, targeting customers that align with our lifetime expected returns. Over time we expect to build a base of recurring customers with more favorable loss ratios, resulting in the following financial impacts:

Current wording

To scale the business, we aim to drive new customer growth by capitalizing on our two distribution channels: direct and partnership. In both channels we seek to optimize unit economics. Loss ratios for customers in their initial term are generally higher than in subsequent terms. As a young insurance company, compared to our peers, our results are disproportionately weighted toward new customers. We believe our data- and technology-driven approach allows for rapid response to macroeconomic trends through quick, appropriate rate actions. Our ability to continually enhance our underwriting and segmentation capabilities has contributed to improvement in our gross loss ratios. Our marketing spend is grounded in a disciplined data-science approach, targeting customers that align with our lifetime expected returns. Over time we expect to build a base of recurring customers with more favorable loss ratios, resulting in the following financial impacts:

Previous wording

•Improved loss ratio. Through improvements in our pricing, underwriting and segmentation we have seen improvement to our gross loss ratios. Renewal premiums, referring to premiums from a customer’s second term and beyond, have lower loss ratios as compared to new premiums in the customer’s first term. As we grow our business we anticipate, consistent with industry norms, that a greater proportion of our premiums will be from customer renewals and drive down the loss ratio across our portfolio. We also continue to revise contracts to tighten underwriting and implement rate increases to control the impact of increased loss costs.

Current wording

•Improved loss ratio. Through improvements in our pricing, underwriting and segmentation we have seen improvement to our gross loss ratios. Renewal premiums, referring to premiums from a customer’s second term and beyond, generally have lower loss ratios as compared to new premiums in the customer’s first term. As we grow our business we anticipate, consistent with industry norms, that a greater proportion of our premiums will be from customer renewals and drive down the loss ratio across our portfolio. We also continue to revise contracts to tighten underwriting and utilize our data- and technology-driven approach to implement appropriate rate actions.

Previous wording

We use technology to drive efficiency across all functions, including distribution, underwriting, policy administration and claims in particular. We continue to develop machine learning loss models, which allow us to respond more quickly to changes in the market, improve pricing segmentation and take appropriate and timely rate actions. We believe this allows us to operate with a cost to acquire and cost to serve advantage. We efficiently acquire customers through multiple channels, including direct digital (performance), channel media, referrals, and partnership, including embedded and agency and affinity. Our evolving acquisition strategy includes utilizing our embedded insurance offering with current and future strategic partners. Our marketing costs have historically been well below industry averages, although in any given period, these costs can vary by acquisition strategy, channel mix, by state, or due to seasonality or due to the competitive environment. Today, we acquire the vast majority of our customers through mobile apps. We believe that through prudent investment in and diversification of our marketing channels, including leveraging proprietary data science and technology and a focus on partnerships with our current and future strategic partners, will position us for more sustainable, long-term and profitable growth.

Current wording

We use technology to drive efficiency across all functions, including distribution, underwriting, policy administration and claims in particular. We continue to develop machine learning loss models, which allow us to respond more quickly to changes in the market, improve pricing segmentation and take appropriate and timely rate actions. We believe this allows us to operate with a cost to acquire and cost to serve advantage. We efficiently acquire customers through multiple channels, including direct digital (performance), channel media, referrals, and partnership, including embedded, agency and affinity. Our evolving acquisition strategy includes utilizing our embedded insurance offering with current and future strategic partners. Our marketing costs have historically been well below industry averages, although in any given period, these costs can vary by acquisition strategy, channel mix, by state, seasonality or due to the competitive environment. Today, we acquire the vast majority of our customers through mobile apps. We believe that through prudent investment in and diversification of our marketing channels, including leveraging proprietary data science and technology and a focus on partnerships with our current and future strategic partners, will position us for more sustainable, long-term and profitable growth.

Previous wording

We define direct contribution, a non-GAAP financial measure, as gross profit excluding net investment income, net realized gains on investments, report costs, commission expenses related to our partnership channel, certain warrant compensation expense related to policies originating through the integrated automobile insurance solution for Carvana’s online buying platform, overhead allocated based on headcount, or Overhead, and salaries, health benefits, bonuses, employee retirement plan-related expenses and employee share-based compensation expense, or Personnel Costs, licenses, professional fees and other expenses, ceded premiums earned, ceded loss and LAE, and net ceding commission and other. Net ceding commission and other is comprised of ceding commission received in connection with reinsurance ceded, partially offset by amortization of excess ceding commission, and other impacts of reinsurance ceded, which are included in other insurance expense. After these adjustments, the resulting calculation is inclusive of only those gross variable costs of revenue incurred on the successful acquisition of business. We view direct contribution as an important metric because we believe it measures progress towards the profitability of our total policy portfolio prior to the impact of reinsurance.

Current wording

We define direct contribution, a non-GAAP financial measure, as gross profit excluding net investment income, report costs, commission expenses related to our partnership channel, certain warrant compensation expense related to policies originating through the integrated automobile insurance solution for Carvana’s online buying platform, overhead allocated based on headcount, or Overhead, and salaries, health benefits, bonuses, employee retirement plan-related expenses and employee share-based compensation expense, or Personnel Costs, licenses, professional fees and other expenses, ceded premiums earned, ceded loss and LAE, and net ceding commission and other. Net ceding commission and other is comprised of ceding commission received in connection with reinsurance ceded, partially offset by amortization of excess ceding commission, and other impacts of reinsurance ceded, which are included in other insurance expense. After these adjustments, the resulting calculation is inclusive of only those gross variable costs of revenue incurred on the successful acquisition of business. We view direct contribution as an important metric because we believe it measures progress towards the profitability of our total policy portfolio prior to the impact of reinsurance.

Previous wording

We define adjusted EBITDA, a non-GAAP financial measure, as net loss excluding interest expense, income tax expense, depreciation and amortization, share-based compensation, warrant compensation expense, restructuring charges, write-off of prepaid marketing expenses, legal fees and other items that do not reflect our ongoing operating performance. After these adjustments, the resulting calculation represents expenses directly attributable to our operating performance. We use adjusted EBITDA as an internal performance measure in the management of our operations because we believe it provides management and other users of our financial information useful insight into our results of operations and underlying business performance. Adjusted EBITDA should not be viewed as a substitute for net loss calculated in accordance with GAAP, and other companies may define adjusted EBITDA differently.

Current wording

We define adjusted EBITDA, a non-GAAP financial measure, as net loss excluding interest expense, income tax expense, depreciation and amortization, share-based compensation, warrant compensation expense, restructuring charges, legal fees and other items that do not reflect our ongoing operating performance. After these adjustments, the resulting calculation represents expenses directly attributable to our operating performance. We use adjusted EBITDA as an internal performance measure in the management of our operations because we believe it provides management and other users of our financial information useful insight into our results of operations and underlying business performance. Adjusted EBITDA should not be viewed as a substitute for net loss calculated in accordance with GAAP, and other companies may define adjusted EBITDA differently.

Previous wording

We define gross LAE ratio expressed as a percentage, as the ratio of gross LAE to gross premiums earned. We view gross LAE ratio as an important metric because it allows us to evaluate incurred losses and LAE separately. Currently, we do not cede any of our LAE to our third-party quota share reinsurance treaties; therefore, we actively monitor LAE ratio as it has a direct impact on our results regardless of our reinsurance strategy.

Current wording

We define gross LAE ratio expressed as a percentage, as the ratio of gross LAE to gross premiums earned. We view gross LAE ratio as an important metric because it allows us to evaluate incurred losses and LAE separately prior to the impact of reinsurance.

Previous wording

Net investment income represents interest earned from our cash and cash equivalents and fixed maturity and short-term investments and unrealized gains and losses from our private equity investments less investment expenses. Net investment income also includes impairments related to Low Income Housing Tax Credits investments in limited liability entities to offset certain state premium taxes. These tax credits are recognized when utilized. Net investment income is directly correlated with the overall size of our investment portfolio, market level of interest rates and changes in the fair value of our private equity investments. Net investment income will vary with the size and composition of our investment portfolio, market returns and the investment strategy.

Current wording

Net investment income represents interest earned from our cash and cash equivalents and fixed maturity and short-term investments less investment expenses. Net investment income also includes impairments related to Low Income Housing Tax Credits investments in limited liability entities to offset certain state premium taxes. These tax credits are recognized when utilized. Net investment income is directly correlated with the overall size of our investment portfolio, market level of interest rates and changes in the fair value of our private equity investments.

Previous wording

Interest expense is not an operating expense; therefore, we include these expenses below operating expenses. Interest expense primarily relates to interest incurred on our long-term debt, certain fees that are expensed as incurred and amortization of debt issuance costs. In addition, changes in the fair value of warrant liabilities that were associated with our long-term debt are recorded as interest expense.

Current wording

Interest expense is not an operating expense; therefore, we include these expenses below operating expenses. Interest expense primarily relates to interest incurred on our long-term debt, certain fees that are expensed as incurred and amortization of debt issuance costs. In addition, changes in the fair value of warrant liabilities that are associated with our long-term debt are recorded as interest expense.

Previous wording

Net premiums earned increased $170.3 million, or 283.8%, to $230.3 million, for the three months ended March 31, 2024 compared to the same period in 2023. The increase was primarily due to reduced cessions of gross premiums earned to reinsurers between periods. The increase was also due to an increase in policies in force as a result of increased direct performance marketing spend, and greater premium per policy resulting from rate actions.

Current wording

Net premiums earned increased $197.7 million, or 309.4%, to $261.6 million for the three months ended June 30, 2024 compared to the same period in 2023. The increase was primarily due to reduced cessions of gross premiums earned to reinsurers between periods. The increase was also due to an increase in policies in force as a result of increased direct performance marketing spend and greater premium per policy resulting from rate actions.

Previous wording

During the three months ended March 31, 2024 and 2023, we ceded approximately 16.3% and 53.9% of our gross premiums earned, respectively. The change in cessions between periods was primarily driven by a strategic reduction of quota share reinsurance and commutations of certain reinsurance agreements as previously discussed in the second half of 2023.

Current wording

During the three months ended June 30, 2024 and 2023, we ceded approximately 15.1% and 51.4% of our gross premiums earned, respectively. The change in cessions between periods was primarily driven by a strategic reduction of quota share reinsurance and commutations of certain reinsurance agreements as previously discussed in the second half of 2023.

Previous wording

Gross premiums written increased for the three months ended March 31, 2024 primarily due to growth in new writings as a result of increased direct performance marketing spend compared to the same period in 2023. The increase in gross premiums earned was primarily due to greater policies in force and a 14.7% increase in premium per policy primarily attributable to rate actions.

Current wording

Gross premiums written increased for the three months ended June 30, 2024 primarily due to growth in new writings as a result of increased direct performance marketing spend compared to the same period in 2023.The increase in gross premiums earned was primarily due to greater policies in force and a 12.5% increase in premium per policy primarily attributable to rate actions.

Previous wording

Fee income increased $11.5 million, or 359.4%, to $14.7 million for the three months ended March 31, 2024 compared to the same period in 2023. The increase was primarily driven by a $4.9 million increase in policy fees due to implementation of new fees as a result of refining our fee schedules to policyholders. We also experienced a $4.8 million increase in installment fees and a $1.2 million increase in late fees attributable to an increase in collected fees, as a result of increased policies in force.

Current wording

Fee income increased $12.8 million, or 336.8%, to $16.6 million for the three months ended June 30, 2024 compared to the same period in 2023. The increase was primarily driven by a $7.2 million increase in policy fees due to implementation of new fees as a result of refining our fee schedules to policyholders and increased policies in force. We also experienced a $4.9 million increase in installment fees attributable to an increase in collected fees, as a result of increased gross written premium.

Previous wording

Loss and LAE increased $103.1 million, or 162.9%, to $166.4 million for the three months ended March 31, 2024 compared to the same period in 2023. The increase was primarily due to additional losses incurred on increased gross premiums earned volume and reduced cessions of losses to reinsurers for the three months ended March 31, 2024 compared to the same period in 2023.

Current wording

Loss and LAE increased $130.8 million, or 219.8%, to $190.3 million for the three months ended June 30, 2024 compared to the same period in 2023. The increase was primarily due to additional losses incurred on increased gross premiums earned volume and reduced cessions of losses to reinsurers for the three months ended June 30, 2024 compared to the same period in 2023.

Previous wording

Gross accident period loss ratios decreased to 61.2% for the three months ended March 31, 2024, from 65.6% for the same period in 2023. The change in the ratios was driven by growth in average premium per policy primarily attributable to rate actions. This was partially offset by business tenure mix and higher loss costs as a result of increased severity per claim due to higher vehicle repair and medical costs. We estimated an 11% increase in severity per claim and a 3% decrease in claim frequency for the three months ended March 31, 2024 compared to the same period in 2023. The claim severity and frequency estimates are based on bodily injury, collision, and property damage coverages, the claim frequency estimates are tenure mix adjusted.

Current wording

Gross accident period loss ratios decreased to 62.4% for the three months ended June 30, 2024, from 64.8% for the same period in 2023. The change in the ratios was driven by growth in average premium per policy primarily attributable to rate actions. This was partially offset by business tenure mix and higher loss costs as a result of increased severity per claim due to higher vehicle repair and medical costs. We estimated a 6% increase in severity per claim and a 1% increase in claim frequency for the three months ended June 30, 2024 compared to the same period in 2023 across our bodily injury, collision, and property damage coverages. The claim frequency estimates are tenure mix adjusted.

Previous wording

Sales and marketing expense increased $26.8 million, or 744.4%, to $30.4 million for the three months ended March 31, 2024 compared to the same period in 2023. The increase was due to a $26.1 million increase in direct performance marketing spend to drive accretive growth and deeper market penetration in the states in which we operate.

Current wording

Sales and marketing expense increased $28.1 million, or 460.7%, to $34.2 million for the three months ended June 30, 2024 compared to the same period in 2023. The increase was due to a $25.0 million increase in direct performance marketing spend to drive accretive growth and deeper market penetration in the states in which we operate.

Previous wording

Other insurance expense increased $23.3 million, or 1,792.3%, to $24.6 million for the three months ended March 31, 2024 compared to the same period in 2023. The increase was primarily driven by a $6.9 million decrease in net ceding commission contra-expense as a result of a decline in ceded premiums written, primarily attributable to a strategic reduction of quota share reinsurance in the second half of 2023. We also experienced a $6.2 million increase in report costs due to an increase in customer applications and new writings. In addition, we experienced a $3.9 million increase in commission expenses related to the continued growth in our partnership channel including amortization of deferred policy acquisition costs. We also experienced a $3.2 million increase in premium write-offs and a $2.8 million increase in premium taxes primarily attributable to an increase in gross premiums earned.

Current wording

Other insurance expense increased $25.5 million, or 980.8%, to $28.1 million for the three months ended June 30, 2024 compared to the same period in 2023. The increase was primarily driven by an $8.4 million decrease in net ceding commission contra-expense as a result of a decline in ceded premiums written, largely attributable to a strategic reduction of quota share reinsurance in the second half of 2023. We also experienced a $5.7 million increase in premium write-offs and a $3.6 million increase in premium taxes primarily attributable to an increase in gross premiums earned. In addition, we experienced a $3.2 million increase in commission expenses related to the continued growth in our partnership channel including amortization of deferred policy acquisition costs. We also experienced a $2.0 million increase in report costs due to an increase in customer applications and new writings growth and a $1.8 million increase in policy processing fees. This was partially offset by a $2.8 million decrease in Carvana warrant expense. All short-term warrant expense has been recognized, as a result of all short-term warrants fully vesting.

Previous wording

General and administrative decreased $4.4 million, or 20.5%, to $17.1 million for the three months ended March 31, 2024 compared to the same period in 2023. The decrease was primarily driven by a $5.7 million decrease in legal and professional fees.

Current wording

General and administrative decreased $7.0 million, or 16.6%, to $35.2 million for the six months ended June 30, 2024 compared to the same period in 2023. The decrease was primarily driven by a $6.9 million decrease in legal and professional fees.

Previous wording

Our management uses these non-GAAP financial measures, in conjunction with GAAP financial measures, as an integral part of managing our business and to, among other things: (1) monitor and evaluate the performance of our business operations and financial performance; (2) facilitate internal comparisons of the historical operating performance of our business operations; (3) facilitate external comparisons of the results of our overall business to the historical operating performance of other companies that may have different capital structures and debt levels; (4) review and assess the operating performance of our management team; (5) analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (6) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments.

Current wording

Our management uses these non-GAAP financial measures, in conjunction with GAAP financial measures, as an integral part of managing our business and to, among other things: (1) monitor and evaluate the performance of our business operations and financial performance; (2) facilitate internal comparisons of the historical operating performance of our business operations; (3) facilitate external comparisons of the results of our overall business to the historical operating performance of other companies that may have different capital structures and debt levels; (4) review and assess the performance of our management team, including when determining incentive compensation; (5) analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (6) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments.

Previous wording

The following table provides a reconciliation of total revenue to direct contribution for the three months ended March 31, 2024 and 2023:

Current wording

The following table provides a reconciliation of total revenue to direct contribution for the three and six months ended June 30, 2024 and 2023:

Previous wording

The following table provides a reconciliation of net loss to adjusted EBITDA for the three months ended March 31, 2024 and 2023:

Current wording

The following table provides a reconciliation of net loss to adjusted EBITDA for the three and six months ended June 30, 2024 and 2023:

Previous wording

(1) Restructuring costs consist of employee costs, real estate exit costs, and other. This includes share-based compensation of zero and $0.4 million for the three months ended March 31, 2024 and March 31, 2023, respectively. This also includes depreciation and amortization of $0.1 million for the three months ended March 31, 2024 and March 31, 2023. For further information on restructuring costs, see Note 9, “Restructuring Costs,” in the Notes to Condensed Consolidated Financial Statements.

Current wording

(1) Restructuring costs consist of employee costs, real estate exit costs, and other. This includes share-based compensation of zero for the three and six months ended June 30, 2024, and zero and $0.4 million for the three and six months ended June 30, 2023, respectively. This also includes depreciation and amortization of $0.1 million and $0.2 million for the three and six months ended June 30, 2024 and 2023, respectively. For further information on restructuring costs, see Note 9, “Restructuring Costs,” in the Notes to Condensed Consolidated Financial Statements.

Previous wording

(2) Write-offs and other primarily reflects legal costs, write-off of prepaid marketing expense and other items that do not reflect our ongoing operating performance. Legal and other fees related to the 2022 purported misappropriation of funds by a former senior marketing employee of $0.1 million and $2.0 million for the three months ended March 31, 2024 and March 31, 2023, respectively.

Current wording

(2) Write-offs and other primarily reflects legal costs and other items that do not reflect our ongoing operating performance. Legal and other fees related to the 2022 purported misappropriation of funds by a former senior marketing employee of $0.4 million and $0.5 million for the three and six months ended June 30, 2024, respectively, and $0.4 million and $2.4 million for the three and six months ended June 30, 2023, respectively.

Previous wording

Since inception, we have financed operations primarily through sales of insurance policies and the net proceeds we have received from our issuance of stock and debt and from sales of investments. Cash generated from operations is highly dependent on being able to efficiently acquire and maintain customers while pricing our insurance products appropriately. We are continuously evaluating alternatives for efficiently funding our ongoing operations. We expect, from time to time, to engage in a variety of financing transactions for such purposes, including the issuance of stock and debt.

Current wording

Since inception, we have financed operations primarily through sales of insurance policies and the net proceeds we have received from our issuance of stock and debt and from sales of investments. Cash generated from operations is highly dependent on being able to efficiently acquire and maintain customers while pricing our insurance products appropriately. We are continuously evaluating alternatives for efficiently funding our ongoing operations and reducing our cost of capital. We expect, from time to time, to engage in a variety of financing transactions for such purposes, including the issuance of stock and debt.

Previous wording

On January 26, 2022, we closed on a $300.0 million five-year term loan, or Term Loan. The maturity of the Term Loan is January 27, 2027. Interest is payable quarterly and is determined on a floating interest rate calculated on the Secured Overnight Financing Rate with a 1.0% floor, plus 9.0%.

Current wording

On January 26, 2022, we closed on a $300.0 million five-year term loan, or Term Loan. The maturity of the Term Loan is January 27, 2027. Interest is payable quarterly and is determined on a floating interest rate calculated on the Secured Overnight Financing Rate with a 1.0% floor, plus 9.0%. The Term Loan can be repaid at anytime through the maturity date as long as we provide at least three business days of written notice and pay a prepayment premium, which expired on July 26, 2024.

Previous wording

As of March 31, 2024, we had $640.5 million in cash and cash equivalents, of which $482.6 million was held outside of regulated insurance entities. We also had $216.0 million in marketable securities.

Current wording

As of June 30, 2024, we had $667.2 million in cash and cash equivalents, of which $447.4 million was held outside of regulated insurance entities. We also had $235.5 million in marketable securities.

Previous wording

Tax withholding obligations arise upon vesting of shares of RSUs and PSUs and these obligations must be satisfied at the time they arise through cash payments remitted to the relevant tax authorities. To the extent we satisfy our tax withholding obligations with respect to these equity compensation awards by withholding shares and remitting cash to the relevant tax authorities, the amount of expense and net cash payments due for taxes upon the vesting of such equity compensation awards is dependent on the price of our Class A common stock on the applicable vesting dates and could be substantial. Future obligations could have a negative impact on our liquidity and ability to use funds for operational purposes.

Current wording

Tax withholding obligations arise upon vesting of shares of RSUs and PSUs, and these obligations must be satisfied at the time they arise through cash payments remitted to the relevant tax authorities. To the extent we satisfy our tax withholding obligations with respect to these equity compensation awards by withholding shares and remitting cash to the relevant tax authorities, the amount of cash payments due for taxes upon the vesting of such equity compensation awards is dependent on the price of our Class A common stock on the applicable vesting dates and could be substantial. Future obligations could have a negative impact on our liquidity and ability to use funds for operational purposes. During the second quarter of 2024, we paid $10.8 million in tax withholding obligations arising from the vesting of shares of RSUs and PSUs.

Previous wording

For illustrative purposes, assuming a stock price of $60.52 per share (the closing price of our shares of Class A common stock on the NASDAQ on April 1, 2024), we estimate that our tax withholding obligations on account of remaining vesting events for the second quarter of 2024 of $10.6 million, and for each of the subsequent three quarters through March 31, 2025 of approximately $2.4 million.

Current wording

For illustrative purposes, assuming a stock price of $51.48 per share (the closing price of our shares of Class A common stock on the The Nasdaq Stock Market on July 1, 2024), we estimate that our tax withholding obligations on account of remaining vesting events for each of the subsequent three quarters through the first quarter of 2025 of approximately $2.1 million and approximately $5.0 million for the second quarter 2025.

Previous wording

Our debt covenants required cash and cash equivalents held in entities other than our insurance subsidiaries to be at least $200.0 million at all times. As of March 31, 2024, we have met the conditions to reduce this to $150.0 million as a result of issuing more than 62,500 insurance policies through our Carvana embedded product and achieving a direct contribution to gross premiums earned ratio of greater than 12%. We must continue to satisfy the direct contribution to gross premiums earned ratio requirement at the end of each fiscal quarter in order to maintain the reduced threshold of $150.0 million.

Current wording

Our debt covenants required cash and cash equivalents held in entities other than our insurance subsidiaries to be at least $150.0 million. We must continue to satisfy the direct contribution to gross premiums earned ratio requirement of greater than 12% at the end of each fiscal quarter in order to maintain the threshold of $150.0 million. If we do not satisfy these requirements, the threshold will return to $200.0 million.

Previous wording

Net cash provided by operating activities for the three months ended March 31, 2024 was $14.5 million compared to $83.7 million of net cash used in operating activities for the three months ended March 31, 2023. The increase in cash provided by operating activities was due to a material reduction in net loss between the periods, increase in the loss and LAE reserves for the three months ended March 31, 2024 reflecting the growth in policies in force versus a decrease in loss and LAE reserves during the three months ended March 31, 2023, and increase in net reinsurance recoverables during the three months ended March 31, 2024 compared to the same period in 2023.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2024 was $77.1 million compared to $94.3 million of net cash used in operating activities for the six months ended June 30, 2023. The increase in cash provided by operating activities was due to an increase in the loss and LAE reserves for the six months ended June 30, 2024 reflecting the growth in policies in force, a material reduction in net loss between the periods, growth in premiums not yet earned and timing of reinsurance payments. This was partially offset by timing of reinsurance receipts and claims receipts during the six months ended June 30, 2024 compared to the same period in 2023.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2024 was $52.3 million compared to $0.9 million of net cash provided by investing activities for the three months ended March 31, 2023. The increase in cash used in investing activities was primarily due to purchases of investments.

Current wording

Net cash used in investing activities for the six months ended June 30, 2024 was $74.3 million compared to $39.2 million of net cash used in investing activities for the six months ended June 30, 2023. The increase in cash used in investing activities was primarily due to purchases of investments which was partially offset by proceeds from maturities, call and pay downs of investments.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2024 was $0.4 million, compared to no financing activity for the three months ended March 31, 2023. The change in net cash used in financing activities was due to taxes paid related to net share settlement of vested restricted stock units.

Current wording

Net cash used in financing activities for the six months ended June 30, 2024 was $14.3 million compared to $0.6 million of net cash used in financing activity for the six months ended June 30, 2023. The increase in cash used in financing activities was primarily due to tax withholding obligations arising from the vesting of shares of RSUs and PSUs during the six months ended June 30, 2024.

Previous wording

Our financial statements are prepared in accordance with GAAP. The preparation of the condensed consolidated financial statements in conformity with GAAP requires our management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the period. We evaluate our significant estimates on an ongoing basis, including, but not limited to, estimates related to reserves for loss and LAE, valuation allowance on our deferred tax assets, premium write-offs and allowance for expected credit losses on premium receivables and reinsurance recoverables. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

Current wording

Our financial statements are prepared in accordance with GAAP. The preparation of the condensed consolidated financial statements in conformity with GAAP requires our management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the period. We evaluate our significant estimates on an ongoing basis, including, but not limited to, estimates related to reserves for loss and LAE, valuation allowance on our deferred tax assets and allowance for expected credit losses on premium receivables and reinsurance recoverables. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

Previous wording

Our critical accounting estimates are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates,” in our 2023 10-K and the Notes to Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q. During the three months ended March 31, 2024, there were no material changes to our critical accounting estimates from those discussed in our 2023 10-K.

Current wording

Our critical accounting estimates are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates,” in our 2023 10-K and the Notes to Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q. During the six months ended June 30, 2024, there were no material changes to our critical accounting estimates from those discussed in our 2023 10-K.