Root Inc

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, 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 income (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 income (loss) calculated in accordance with GAAP, and other companies may define adjusted EBITDA differently.

Previous wording

See the section titled “—Non-GAAP Financial Measures” for a reconciliation of net loss to adjusted EBITDA.

Current wording

See the section titled “—Non-GAAP Financial Measures” for a reconciliation of net income (loss) to adjusted EBITDA.

Previous wording

Other insurance expense includes underwriting expenses, commission expenses related to our partnership channel, premium taxes, credit card and policy processing expenses, premium write-offs, insurance license expenses, certain warrant compensation expense related to policies originating through the integrated automobile insurance solution for Carvana’s online buying platform, and Personnel Costs and Overhead related to actuarial and certain data science activities. We amortize a portion of our deferred policy acquisition costs including certain commissions related to our partnership channel, premium taxes, and report costs related to the successful acquisition of a policy. Other insurance expense is expensed as incurred, except for costs related to deferred policy acquisition costs that are capitalized and subsequently amortized over the same period in which the related premiums are earned. Certain warrant compensation expense is recognized on a pro-rata basis considering progress toward achieving milestones for policies originated through the Integrated Platform as defined under the Carvana commercial agreement.

Current wording

Other insurance expense includes underwriting expenses and any refunds related to these expenses, commission expenses related to our partnership channel, premium taxes which includes low income housing tax credits to offset certain state premium taxes, credit card and policy processing expenses, premium write-offs, insurance license expenses, certain warrant compensation expense related to policies originating through the integrated automobile insurance solution for Carvana’s online buying platform, and Personnel Costs and Overhead related to actuarial and certain data science activities. We amortize a portion of our deferred policy acquisition costs including certain commissions related to our partnership channel, premium taxes, and report costs related to the successful acquisition of a policy. Tax credits are recognized when utilized. Other insurance expense is expensed as incurred, except for costs related to deferred policy acquisition costs that are capitalized and subsequently amortized over the same period in which the related premiums are earned. Certain warrant compensation expense is recognized on a pro-rata basis considering progress toward achieving milestones for policies originated through the Integrated Platform as defined under the Carvana commercial agreement.

Previous 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.

Current wording

Net premiums earned increased $179.3 million, or 179.3%, to $279.3 million for the three months ended September 30, 2024 compared to the same period in 2023. The increase was primarily due to an increase in policies in force as a result of increased direct performance marketing spend, reduced cessions of gross premiums earned to reinsurers between periods and greater premium per policy resulting from rate actions.

Previous 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.

Current wording

During the three months ended September 30, 2024 and 2023, we ceded approximately 11.9% and 37.4% 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 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.

Current wording

Gross premiums written increased for the three months ended September 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 an 11.4% increase in premium per policy primarily attributable to rate actions.

Previous 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.

Current wording

Fee income increased $10.9 million, or 175.8%, to $17.1 million for the three months ended September 30, 2024 compared to the same period in 2023. The increase was primarily driven by a $6.9 million increase in policy fees due to increased policies in force. We also experienced a $3.3 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 $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.

Current wording

Loss and LAE increased $98.7 million, or 115.0%, to $184.5 million for the three months ended September 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 September 30, 2024 compared to the same period in 2023.

Previous wording

Gross accident period loss ratios decreased to 61.4% for the six months ended June 30, 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 a 7% increase in severity per claim and a 1% decrease in claim frequency for the six 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.

Current wording

Gross accident period loss ratios decreased to 58.4% for the three months ended September 30, 2024, from 62.8% 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. We estimated a 6% increase in severity per claim and a 7% decrease in claim frequency for the three months ended September 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 $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.

Current wording

Sales and marketing expense increased $20.9 million, or 159.5%, to $34.0 million for the three months ended September 30, 2024 compared to the same period in 2023. The increase was primarily due to a $17.7 million increase in direct performance marketing spend to drive accretive growth and deeper market penetration in the states in which we operate. We also experienced a $2.4 million increase in experimental marketing spend as part of our efforts to diversify our distribution channels.

Previous wording

Other insurance expense increased $48.8 million, or 1,251.3%, to $52.7 million for the six months ended June 30, 2024 compared to the same period in 2023. The increase was primarily driven by a $15.4 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 an $8.9 million increase in premium write-offs and an $8.2 million increase in report costs due to an increase in customer applications and new writings growth. In addition, we experienced a $7.1 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 $6.4 million increase in premium taxes primarily attributable to an increase in gross premiums earned and a $3.4 million increase in policy processing fees. This was partially offset by a $4.4 million decrease in Carvana warrant expense. All short-term warrant expense has been recognized, as a result of all short-term warrants fully vesting.

Current wording

Other insurance expense increased $4.1 million, or 22.4%, to $22.4 million for the three months ended September 30, 2024 compared to the same period in 2023. The increase was primarily driven by a $5.9 million increase in premium write-offs as a result of greater policies in force. We also experienced a $5.7 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. In addition, we experienced a $4.0 million increase in commission expenses related to the continued growth in our partnership channel including amortization of deferred policy acquisition costs and a $4.0 million increase in premium taxes primarily attributable to an increase in gross premiums earned. We also experienced a $1.5 million increase in policy processing fees as a result of greater premiums earned during the period. This was partially offset by a $6.7 million sales tax refund related to multiple prior years and a $5.0 million decrease in Carvana warrant expense. All short-term warrant expense has been recognized, as a result of all short-term warrants fully vesting. In addition, we experienced a $3.3 million decrease in premium taxes related to low income housing tax credit utilization in the period and a $3.2 million decrease in report costs primarily driven by enhanced efficiency and reduced costs for reports related to new business.

Previous wording

Net premiums earned increased $368.0 million, or 297.0%, to $491.9 million for the six 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.

Current wording

Net premiums earned increased $547.3 million, or 244.4%, to $771.2 million for the nine months ended September 30, 2024 compared to the same period in 2023. The increase was primarily due to an increase in policies in force as a result of increased direct performance marketing spend, reduced cessions of gross premiums earned to reinsurers between periods and greater premium per policy resulting from rate actions.

Previous wording

During the six months ended June 30, 2024 and 2023, we ceded approximately 15.6% and 52.6% 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 nine months ended September 30, 2024 and 2023, we ceded approximately 14.3% and 46.9% 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.

Previous wording

The following table presents gross premiums written, ceded premiums written, net premiums written, gross premiums earned, ceded premiums earned and net premiums earned for the six months ended June 30, 2024 and 2023:

Current wording

The following table presents gross premiums written, ceded premiums written, net premiums written, gross premiums earned, ceded premiums earned and net premiums earned for the nine months ended September 30, 2024 and 2023:

Previous wording

Gross premiums written increased for the six 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.

Current wording

Gross premiums written increased for the nine months ended September 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 an 11.4% increase in premium per policy primarily attributable to rate actions.

Previous wording

Fee income increased $24.3 million, or 347.1%, to $31.3 million for the six months ended June 30, 2024 compared to the same period in 2023. The increase was primarily driven by a $13.3 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 $9.7 million increase in installment fees attributable to an increase in collected fees, as a result of increased gross written premium.

Current wording

Fee income increased $35.2 million, or 266.7%, to $48.4 million for the nine months ended September 30, 2024 compared to the same period in 2023. The increase was primarily driven by a $20.2 million increase in policy fees due to increased policies in force. We also experienced a $13.0 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 $233.9 million, or 190.5%, to $356.7 million for the six 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 six months ended June 30, 2024 compared to the same period in 2023.

Current wording

Loss and LAE increased $332.6 million, or 159.4%, to $541.2 million for the nine months ended September 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 nine months ended September 30, 2024 compared to the same period in 2023.

Previous 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.

Current wording

Gross accident period loss ratios decreased to 60.3% for the nine months ended September 30, 2024, from 64.5% 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 3% decrease in claim frequency for the nine months ended September 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 $54.9 million, or 566.0%, to $64.6 million for the six months ended June 30, 2024 compared to the same period in 2023. The increase was due to a $51.8 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 $75.8 million, or 332.5%, to $98.6 million for the nine months ended September 30, 2024 compared to the same period in 2023. The increase was primarily due to a $69.4 million increase in direct performance marketing spend to drive accretive growth and deeper market penetration in the states in which we operate. We also experienced a $5.2 million increase in experimental marketing spend as part of our efforts to diversify our distribution channels.

Previous 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.

Current wording

Other insurance expense increased $52.9 million, or 238.3%, to $75.1 million for the nine months ended September 30, 2024 compared to the same period in 2023. The increase was primarily driven by a $21.0 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 $14.8 million increase in premium write-offs as a result of greater policies in force. Commission expenses increased $11.1 million related to the continued growth in our partnership channel including amortization of deferred policy acquisition costs. Premium taxes increased $10.6 million primarily attributable to an increase in gross premiums earned. In addition, we experienced a $5.0 million increase in report costs due to an increase in customer applications and new writings growth and a $4.9 million increase in policy processing fees as a result of greater premium earned during the period. This was partially offset by a $9.5 million decrease in Carvana warrant expense. All short-term warrant expense has been recognized, as a result of all short-term warrants fully vesting. We also recorded a $6.7 million sales tax refund related to multiple prior years. In addition, we experienced a $3.5 million decrease in premium taxes related to low income housing tax credit utilization in the period.

Previous wording

Technology and development increased $4.4 million, or 20.7%, to $25.7 million for the six months ended June 30, 2024 compared to the same period in 2023. The increase was primarily driven by a $2.0 million increase in accelerated amortization of internally developed software and a $1.8 million increase in software development expense as we continue to invest in developing and improving our technology platforms and infrastructure.

Current wording

Technology and development increased $6.2 million, or 19.1%, to $38.6 million for the nine months ended September 30, 2024 compared to the same period in 2023. The increase was primarily driven by a $2.5 million increase in Personnel Costs. We also experienced a $2.0 million increase in amortization primarily driven by accelerated amortization of internally developed software and a $1.8 million increase in software development expense as we continue to invest in developing and improving our technology platforms and infrastructure.

Previous 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.

Current wording

General and administrative decreased $10.5 million, or 16.6%, to $52.7 million for the nine months ended September 30, 2024 compared to the same period in 2023. The decrease was primarily driven by a $9.5 million decrease in legal and professional fees.

Previous 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:

Current wording

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

Previous 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:

Current wording

The following table provides a reconciliation of net income (loss) to adjusted EBITDA for the three and nine months ended September 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 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.

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 nine months ended September 30, 2024 and zero and $0.4 million for the three and nine months ended September 30, 2023, respectively. This also includes depreciation and amortization of zero and $0.2 million for the three and nine months ended September 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 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.

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 misappropriation of funds by a former senior marketing employee of zero and $0.5 million for the three and nine months ended September 30, 2024, respectively, and $1.0 million and $3.4 million for the three and nine months ended September 30, 2023, respectively.

Previous wording

Our wholly-owned, Cayman Islands-based reinsurance subsidiary, Root Reinsurance Company, Ltd., or Root Re, maintains a Class B(iii) insurer license under Cayman Islands Monetary Authority, or CIMA. At June 30, 2024, Root Re was subject to compliance with certain capital levels and a net premiums earned to capital ratio of 15:1, which we maintained as of June 30, 2024. The capital ratio can fluctuate at Root Re’s election, subject to regulatory approval. Root Re’s primary sources of funds are capital contributions from the holding company, assumed insurance premiums and net investment income. These funds are primarily used to pay claims and operating expenses and to purchase investments. Root Re must receive approval from CIMA before it can pay any dividend to the holding company.

Current wording

Our wholly-owned, Cayman Islands-based reinsurance subsidiary, Root Reinsurance Company, Ltd., or Root Re, maintains a Class B(iii) insurer license under Cayman Islands Monetary Authority, or CIMA. At September 30, 2024, Root Re was subject to compliance with certain capital levels and a net premiums earned to capital ratio of 15:1, which we maintained as of September 30, 2024. The capital ratio can fluctuate at Root Re’s election, subject to regulatory approval. Root Re’s primary sources of funds are capital contributions from the holding company, assumed insurance premiums and net investment income. These funds are primarily used to pay claims and operating expenses and to purchase investments. Root Re must notify CIMA before it can pay any dividend to the holding company.

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%. 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.

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, or SOFR, with a 1.0% floor, plus 9.0%.

Previous 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.

Current wording

As of September 30, 2024, we had $674.8 million in cash and cash equivalents, of which $439.2 million was held outside of regulated insurance entities. We also had $274.8 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 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.

Current wording

Tax withholding obligations arise upon vesting of shares of restricted stock units and performance-based restricted stock units, 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.

Previous 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.

Current wording

Through September 30, 2024, our debt covenants required cash and cash equivalents held in entities other than our insurance subsidiaries to be at least $150.0 million. We had to 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 did not satisfy these requirements, the threshold would have returned to $200.0 million.

Previous 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.

Current wording

Net cash provided by operating activities for the nine months ended September 30, 2024 was $126.5 million compared to $79.7 million of net cash used in operating activities for the nine months ended September 30, 2023. The increase in cash provided by operating activities was due to an increase in the loss and LAE reserves for the nine months ended September 30, 2024 reflecting the growth in policies in force, higher net income between the periods and timing of reinsurance payments. This was partially offset by timing of reinsurance receipts during the nine months ended September 30, 2024 compared to the same period in 2023 and the impact of commuting certain agreements with reinsurers in the second half of 2023.

Previous 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.

Current wording

Net cash used in investing activities for the nine months ended September 30, 2024 was $114.1 million compared to $46.2 million of net cash used in investing activities for the nine months ended September 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, calls and pay downs of investments.

Previous 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.

Current wording

Net cash used in financing activities for the nine months ended September 30, 2024 was $16.3 million compared to $0.9 million of net cash used in financing activity for the nine months ended September 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 nine months ended September 30, 2024.

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 six months ended June 30, 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 nine months ended September 30, 2024, there were no material changes to our critical accounting estimates from those discussed in our 2023 10-K.