Root, Inc.

Previous wording

To scale the business, we aim to drive new customer growth and optimize unit economics by capitalizing on our two distribution channels: direct and partnership. The direct channel efficiently drives volume for high intent customers, meeting customers in platforms that they use extensively while actively shopping for insurance such as search engines or select marketplace platforms. The data science model seeks to optimize bidding strategies that fine tunes our prices to strike a balance between offering a competitive price and achieving target unit economics. The partnership channel provides differentiated access to high intent customers, primarily in the automotive, financial services, and independent agent sectors. We build upon or within the mobile and web customer experiences of distribution partners to reach a captive customer base with an embedded solution, which can even remove the need for the customer to ever visit a Root website to purchase and bind a policy.

Current wording

To scale the business, we aim to drive new customer growth and optimize unit economics by capitalizing on our two distribution channels: direct and partnership. The direct channel efficiently drives volume for high intent customers, meeting customers in platforms that they use extensively while actively shopping for insurance such as search engines or select marketplace platforms. The data science model seeks to optimize bidding strategies that fine tunes our prices to strike a balance between offering a competitive price and achieving target lifetime unit economics. The partnership channel provides differentiated access to high intent customers, primarily in the automotive, financial services, and independent agent sectors. We build upon or within the mobile and web customer experiences of distribution partners to reach a captive customer base with an embedded solution, which can even remove the need for the customer to ever visit a Root website to purchase and bind a policy.

Previous wording

We use technology to drive efficiency across all functions, including distribution, underwriting, policy administration and claims in particular. We believe our data- and technology-driven approach to pricing and underwriting allows for rapid response to macroeconomic trends and volatility through quick, appropriate rate actions aided by segmenting individual risk based on complex behavioral data and proprietary telematics models. Through continued development of machine-learning loss models, which allow us to respond more quickly to changes in the market, we expect improvement in pricing segmentation. We believe this allows us to operate with a cost-to-acquire and cost-to-serve advantage. We believe that through prudent investment in and diversification of our distribution channels, including leveraging proprietary data science and technology and a focus on partnerships with automotive, financial services, and independent agents, will position us for 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 believe our data- and technology-driven approach to pricing and underwriting allows for rapid response to macroeconomic trends and volatility through quick, appropriate rate actions aided by segmenting individual risk based on complex behavioral data and proprietary telematics models. Through continued development of machine-learning loss models, which allow us to respond more quickly to changes in the market, we expect improvement in pricing segmentation. We believe this allows us to operate with a cost-to-acquire and cost-to-serve advantage. We believe that through prudent investment in and diversification of our distribution channels, including leveraging proprietary data science and technology and a focus on partnerships with automotive, financial services, and independent agents, we are positioned us for sustainable, long-term and profitable growth.

Previous wording

Economic instability has led to acute inflationary pressures, supply chain disruptions, changes in interest rates and changes in equity markets. In addition, economic uncertainty has developed as a result of dialogue and imposition of substantial tariffs and potential retaliatory tariffs. There remains uncertainty around the future of inflation, including as a result of new or increased tariffs; elevated levels of inflation for an extended period could cause claims and claim expenses to increase, impact the performance of our investment portfolio, increase nonpayment cancellations or have other adverse effects, including variability in the competitive environment. We have also seen an increase in vehicle repair and medical costs, which are affected by inflation. These cost increases have resulted in greater claims severity. Additionally, we continue to file in multiple states to establish rates that more closely follow the evolving loss cost trends. Fluctuations in interest rates could impact our cost of capital and may limit our ability to raise additional capital.

Current wording

Economic instability has led to acute inflationary pressures, supply chain disruptions, changes in interest rates and changes in equity markets. In addition, economic uncertainty has developed as a result of changes in tariff policy, including the imposition of new or retaliatory tariffs. There remains uncertainty around the future of inflation, including as a result of new or increased tariffs; elevated levels of inflation for an extended period could cause claims and claim expenses to increase, impact the performance of our investment portfolio, increase nonpayment cancellations or have other adverse effects, including variability in the competitive environment. We have also seen an increase in vehicle repair and medical costs, which are affected by inflation. These cost increases have resulted in greater claims severity. Additionally, we continue to file in multiple states to establish rates that more closely follow the evolving loss cost trends. Fluctuations in interest rates could impact our cost of capital and may limit our ability to raise additional capital.

Previous wording

We regularly review a number of metrics, including the following key performance indicators, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. We believe these non-GAAP and operational measures are useful in evaluating our performance, in addition to our financial results prepared in accordance with accounting principles generally accepted in the U.S., or GAAP. See the section titled “—Non-GAAP Financial Measures” for additional information regarding our use of direct contribution and adjusted EBITDA and their reconciliations to the most directly comparable GAAP measures.

Current wording

We regularly review a number of metrics, including the following key performance indicators, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. In addition to our financial results prepared in accordance with accounting principles generally accepted in the U.S., or GAAP, we believe these non-GAAP and operational measures are useful in evaluating our performance. See the section titled “—Non-GAAP Financial Measures” for additional information regarding our use of direct contribution and adjusted EBITDA and their reconciliations to the most directly comparable GAAP measures.

Previous wording

We define gross premiums written as the total amount of gross premium on policies that were bound during the period less the prorated impact of policy cancellations. Gross premiums written includes direct premiums and assumed premiums. We view gross premiums written as an important metric because it is the metric that most closely correlates with changes in gross premiums earned. We use gross premiums written, which excludes the impact of premiums ceded to reinsurers, to manage our business because we believe that it reflects the business volume and direct economic benefit generated by our customer acquisition activities, which along with our underlying underwriting and claims operations (gross loss ratio and gross LAE), are the key drivers of our future profit opportunities. Additionally, premiums ceded to reinsurers can change significantly based on the type and mix of reinsurance structures we use, and, as such, we have the optionality to fully retain the premiums from customers acquired in the future.

Current wording

We define gross premiums written as the total amount of gross premium on policies that were bound during the period less the prorated impact of policy cancellations. Gross premiums written includes direct premiums and assumed premiums. We view gross premiums written as an important metric because it is the metric that most closely correlates with changes in gross premiums earned. We use gross premiums written, which excludes the impact of premiums ceded to reinsurers, to manage our business because we believe that it reflects the business volume and direct economic benefit generated by our customer acquisition activities, which along with our underlying underwriting and claims operations (gross loss ratio and gross loss adjustment expense, or LAE), are the key drivers of our future profit opportunities. Additionally, premiums ceded to reinsurers can change significantly based on the type and mix of reinsurance structures we use, and, as such, we have the optionality to fully retain the premiums from customers acquired in the future.

Previous wording

We define direct contribution, a non-GAAP financial measure, as gross profit excluding net investment income, acquisition costs, which include report costs and refunds related to these expenses and commission expenses related to our partnership channel, and fixed expenses, which include certain warrant compensation expense related to policies originating through the integrated automobile insurance solution for Carvana’s online buying platform, or Integrated 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. Further impacts related to reinsurance are excluded, these consist of 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 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, acquisition costs, which include report costs and refunds related to these expenses and commission expenses related to our partnership channel, and fixed expenses, which include certain warrant compensation expense related to policies originating through the integrated automobile insurance solution for Carvana’s online buying platform, or Integrated 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. Further impacts related to reinsurance are excluded, and these consist of 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 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 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.

Current wording

We define adjusted EBITDA, a non-GAAP financial measure, as net (loss) income 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) income 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 income (loss) to adjusted EBITDA.

Current wording

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

Previous wording

We define net loss and LAE ratio, expressed as a percentage, as the ratio of net loss and LAE to net premiums earned. We view net loss and LAE ratio as an important metric because it allows us to evaluate loss trends as a percentage of net premiums and believe it is useful for investors to evaluate those separately from other operating expenses.

Current wording

We define net loss and LAE ratio, expressed as a percentage, as the ratio of net loss and LAE to net premiums earned. We view net loss and LAE ratio as an important metric because it allows us to evaluate loss trends as a percentage of net premiums, and we believe it is useful for investors to evaluate those separately from other operating expenses.

Previous wording

Net investment income represents interest earned from our cash and cash equivalents, fixed maturities, 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 cash and 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, fixed maturities, and short-term investments less investment expenses. Investment expenses include costs associated with the management of our investment portfolio, including Personnel Costs. 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 cash and 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.

Previous wording

Other insurance expense includes expenses primarily related to insurance and underwriting operations of the business, and is comprised of acquisition, variable and fixed expenses. We view report costs and refunds related to these expenses and commission expenses related to our partnership channel as acquisition costs. We view premium taxes, credit card and policy processing expenses and premium write-offs as variable costs. We view insurance license expenses, certain warrant compensation expense related to policies originating through the Integrated Platform, low-income housing tax credits which offset certain state premium taxes, Personnel Costs and Overhead related to actuarial and certain data science activities as fixed costs.

Current wording

Other insurance expense includes expenses primarily related to insurance and underwriting operations of the business and is comprised of acquisition, variable and fixed expenses. We view report costs and refunds related to these expenses and commission expenses related to our partnership channel as acquisition costs. We view premium taxes, credit card and policy processing expenses and premium write-offs as variable costs. We view insurance license expenses, warrant compensation expense related to policies originating through the Integrated Platform, low-income housing tax credits which offset certain state premium taxes, Personnel Costs and Overhead related to actuarial and certain data science activities as fixed costs.

Previous wording

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.

Current wording

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. 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

These expenses are recognized net of ceding commissions earned from our quota share reinsurance agreements. The ceding commission provides for reimbursement of both direct and other periodic acquisition costs, including certain underwriting and marketing costs, and is presented as a reduction of other insurance expense. Other insurance expense may increase in the near term due to higher warrant compensation expense. This could occur if the short-term warrants expire unexercised and, at that time, certain long-term warrants become probable of vesting. As a result, we would recognize a cumulative warrant expense catch-up, the magnitude of which would vary considering probability of and progress towards achieving the long-term warrant policy origination milestones.

Current wording

These expenses are recognized net of ceding commissions earned from our quota share reinsurance agreements. The ceding commission provides for reimbursement of both direct and other periodic acquisition costs, including certain underwriting and marketing costs, and is presented as a reduction of other insurance expense.

Previous wording

During the three months ended June 30, 2025 and 2024, we ceded approximately 4.9% and 15.1% of our gross premiums earned, respectively. The change in cessions between periods was primarily driven by a strategic reduction of quota share reinsurance.

Current wording

During the three months ended September 30, 2025 and 2024, we ceded approximately 3.5% and 11.9% of our gross premiums earned, respectively. The change in cessions between periods was primarily driven by a strategic reduction of quota share reinsurance.

Previous wording

Gross premiums written increased for the three months ended June 30, 2025 primarily due to growth in new writings as a result of continued growth in our partnership channel compared to the same period in 2024. The increase in gross premiums earned was primarily due to greater policies in force and a 6.2% increase in premiums per policy primarily attributable to a shift in customer mix and rate actions in 2024.

Current wording

Gross premiums written increased for the three months ended September 30, 2025 primarily due to growth in new writings as a result of continued growth in our partnership channel compared to the same period in 2024. The increase in gross premiums earned was primarily due to greater policies in force and a 1.5% increase in premiums per policy primarily attributable to a shift in customer mix and rate actions in 2024.

Previous wording

Gross accident period loss ratio decreased to 59.6% for the three months ended June 30, 2025, from 61.0% for the same period in 2024. The change in the ratio was driven by growth in average premium per policy primarily attributable to rate actions and favorable weather-related losses. This was partially offset by higher loss costs as a result of increased severity per claim due to higher vehicle repair and medical costs and a geographic mix shift. We observed a 6% increase in accident period severity per claim and a 2% decrease in claim frequency for the three months ended June 30, 2025 compared to the same period in 2024 across our bodily injury, collision, and property damage coverages. The claim frequency estimates are tenure mix adjusted.

Current wording

Gross accident period loss ratio increased to 59.5% for the three months ended September 30, 2025, from 55.5% for the same period in 2024. The change in the ratio was driven by higher loss costs as a result of increased severity per claim due to higher vehicle repair and medical costs and a geographic mix shift. This was partially offset by growth in average premium per policy primarily attributable to rate actions and favorable weather-related losses. We observed a 9% increase in accident period severity per claim and a 2% decrease in claim frequency for the three months ended September 30, 2025 compared to the same period in 2024 across our bodily injury, collision, and property damage coverages. The claim frequency estimates are tenure mix adjusted.

Previous wording

Sales and marketing expense increased primarily due to a $2.8 million increase in direct performance marketing spend, reflective of our investments to drive accretive growth and deeper market penetration in the states in which we operate. While acquisition expenses increased due to heightened competition in the marketing environment, we remained disciplined in our deployment of direct marketing spend, operating within our estimated return targets.

Current wording

Sales and marketing expense increased primarily due to a $3.2 million increase in direct performance marketing spend, reflective of our investments to drive accretive growth and deeper market penetration in the states in which we operate. We also saw a $2.3 million increase in experimental marketing spend as part of our efforts to diversify our distribution channels. While acquisition expenses increased due to heightened competition in the marketing environment, we remained disciplined in our deployment of direct marketing spend, operating within our estimated return targets.

Previous wording

Other insurance expense increased primarily due to a $10.0 million increase in our acquisition expenses driven by greater commissions paid related to the continued growth in our partnership channel, including amortization of deferred policy acquisition costs. We also saw a $6.0 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. We also saw an increase in variable expenses, including a $2.3 million increase in premium taxes, as a result of growth of our earned premium and policies in force.

Current wording

Other insurance expense increased primarily due to a $17.2 million increase in our fixed expenses driven by greater Carvana warrant expense, including a cumulative expense catch-up, related to our outstanding warrant structure with Carvana. Our acquisition expenses increased primarily due to a $10.5 million increase in commissions paid related to the continued growth in our partnership channel, including amortization of deferred policy acquisition costs. In addition, acquisition expenses increased due to a $6.7 million sales tax refund that decreased acquisition expenses in the prior year and a $2.5 million increase in report costs due to an increase in customer applications and new writings. We also saw a $3.3 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.

Previous wording

General and administrative expense increased primarily due to a $4.0 million increase in personnel costs mainly driven by share-based compensation expenses relating to our equity incentive plan.

Current wording

General and administrative expense increased primarily due to a $6.2 million increase in Personnel Costs mainly driven by share-based compensation expenses relating to our equity incentive plan.

Previous wording

During the six months ended June 30, 2025 and 2024, we ceded approximately 5.8% and 15.6% of our gross premiums earned, respectively. The change in cessions between periods was primarily driven by a strategic reduction of quota share reinsurance.

Current wording

During the nine months ended September 30, 2025 and 2024, we ceded approximately 5.0% and 14.3% of our gross premiums earned, respectively. The change in cessions between periods was primarily driven by a strategic reduction of quota share reinsurance.

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, 2025 and 2024:

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, 2025 and 2024:

Previous wording

Gross premiums written increased for the six months ended June 30, 2025 primarily due to continued growth in our partnership channel compared to the same period in 2024. The increase in gross premiums earned was primarily due to greater policies in force and a 6.2% increase in premiums per policy primarily attributable to a shift in customer mix and rate actions in 2024.

Current wording

Gross premiums written increased for the nine months ended September 30, 2025 primarily due to growth in new writings as a result of continued growth in our partnership channel compared to the same period in 2024. The increase in gross premiums earned was primarily due to greater policies in force and a 1.5% increase in premiums per policy primarily attributable to a shift in customer mix and rate actions in 2024.

Previous wording

Fee income increased due to $4.1 million in policy fees and $1.7 million in installment fees due to greater policies in force.

Current wording

Fee income increased due to $5.2 million in policy fees and $2.8 million in installment fees due to greater policies in force.

Previous wording

Loss and LAE increased due to additional losses incurred on increased gross premiums earned volume and reduced cessions of losses to reinsurers driven by a strategic reduction of quota share reinsurance for the six months ended June 30, 2025 compared to the same period in 2024. This volume-driven increase was partially offset by a reduction of loss and LAE reserves on prior periods due to lower than expected reported activity.

Current wording

Loss and LAE increased due to additional losses incurred on increased gross premiums earned volume and reduced cessions of losses to reinsurers driven by a strategic reduction of quota share reinsurance for the nine months ended September 30, 2025 compared to the same period in 2024. This volume-driven increase was partially offset by a reduction of loss and LAE reserves on prior periods due to lower than expected reported activity.

Previous wording

Gross accident period loss ratio decreased to 57.7% for the six months ended June 30, 2025, from 59.6% for the same period in 2024. The change in the ratio was driven by growth in average premium per policy primarily attributable to rate actions. This was partially offset by geographic mix shift and higher loss costs as a result of increased severity per claim due to higher vehicle repair and medical costs. We observed a 5% increase in accident period severity per claim and a 4% decrease in claim frequency for the six months ended June 30, 2025, compared to the same period in 2024 across our bodily injury, collision, and property damage coverages. The claim frequency estimates are tenure mix adjusted.

Current wording

Gross accident period loss ratio increased to 58.7% for the nine months ended September 30, 2025, from 57.9% for the same period in 2024. The change in the ratio was driven by higher loss costs as a result of increased severity per claim due to higher vehicle repair and medical costs and a geographic mix shift. This was partially offset by favorable weather-related losses and growth in average premium per policy primarily attributable to rate actions. We observed a 7% increase in accident period severity per claim and a 4% decrease in claim frequency for the nine months ended September 30, 2025, compared to the same period in 2024 across our bodily injury, collision, and property damage coverages. The claim frequency estimates are tenure mix adjusted.

Previous wording

Sales and marketing expense increased primarily due to a $22.3 million increase in direct performance marketing spend, reflective of our investments to drive accretive growth and deeper market penetration in the states in which we operate. While acquisition expenses increased due to heightened competition in the marketing environment, we remained disciplined in our deployment of direct marketing spend, operating within our estimated return targets.

Current wording

Sales and marketing expense increased primarily due to a $25.5 million increase in direct performance marketing spend, reflective of our investments to drive accretive growth and deeper market penetration in the states in which we operate. We also saw a $2.7 million increase in experimental marketing spend as part of our efforts to diversify our distribution channels. While acquisition expenses increased due to heightened competition in the marketing environment, we remained disciplined in our deployment of direct marketing spend, operating within our estimated return targets.

Previous wording

Other insurance expense increased primarily due to a $14.7 million increase in our acquisition expenses driven by greater commissions paid related to the continued growth in our partnership channel, including amortization of deferred policy acquisition costs. We also saw an $11.7 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. Variable expenses increased primarily due to a $4.0 million increase in premium write-offs and a $3.8 million increase in premium taxes, as a result of growth of our earned premium and policies in force. Fixed expenses decreased primarily due to $3.8 million of Carvana warrant expense recognized in the first half of 2024, as all short-term warrant expense has been recognized upon vesting.

Current wording

Other insurance expense increased primarily due to a $25.1 million increase in our acquisition expenses driven by greater commissions paid related to the continued growth in our partnership channel, including amortization of deferred policy acquisition costs. In addition, acquisition expenses increased due to a $6.7 million sales tax refund that decreased acquisition expenses in the prior year. We also saw a $15.0 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. Fixed expenses increased primarily due to a $13.4 million increase in Carvana warrant expense, including a cumulative expense catch-up, related to our outstanding warrant structure with Carvana. Variable expenses increased primarily due to a $4.6 million increase in premium taxes and a $4.5 million increase in premium write-offs, as a result of growth of our earned premium and policies in force.

Previous wording

General and administrative expense increased primarily due to a $6.0 million increase in personnel costs mainly driven by share-based compensation expenses relating to our equity incentive plan.

Current wording

General and administrative expense increased primarily due to a $12.2 million increase in Personnel Costs mainly driven by share-based compensation expenses relating to our equity incentive plan.

Previous wording

Interest expense decreased primarily due to a $11.5 million decrease in debt interest expense as a result of reduced principal and a more favorable interest rate in connection with the Amended Term Loan.

Current wording

Interest expense decreased primarily due to a $17.3 million decrease in debt interest expense as a result of reduced principal and a more favorable interest rate in connection with the Amended Term Loan.

Previous wording

The following table provides a reconciliation of total revenue to direct contribution for the three and six months ended June 30, 2025 and 2024:

Current wording

The following table provides a reconciliation of total revenue to direct contribution for the three and nine months ended September 30, 2025 and 2024:

Previous wording

(1) Adjustments from other insurance expense consists of acquisition costs, including report costs and refunds related to these expenses and commission expenses related to our partnership channel of $25.0 million and $44.7 million for the three and six months ended June 30, 2025, respectively, and $14.1 million and $29.7 million for the three and six months ended June 30, 2024, respectively. Adjustments from other insurance expense also consists of fixed expenses, including certain warrant compensation expense related to policies originating through the Integrated Platform, Personnel Costs, Overhead, licenses, professional fees and other of $4.6 million and $7.1 million for the three and six months ended June 30, 2025, respectively, and $4.5 million and $9.7 million for the three and six months ended June 30, 2024, respectively.

Current wording

(1) Adjustments from other insurance expense consists of acquisition costs, including report costs and refunds related to these expenses and commission expenses related to our partnership channel of $28.5 million and $73.2 million for the three and nine months ended September 30, 2025, respectively, and $8.2 million and $37.9 million for the three and nine months ended September 30, 2024, respectively. Adjustments from other insurance expense also consists of fixed expenses, including warrant compensation expense related to policies originating through the Integrated Platform, Personnel Costs, Overhead, licenses, professional fees and other of $21.6 million and $28.7 million for the three and nine months ended September 30, 2025, respectively, and $3.4 million and $13.1 million for the three and nine months ended September 30, 2024, respectively.

Previous wording

The following table provides a reconciliation of net income (loss) to adjusted EBITDA for the three and six months ended June 30, 2025 and 2024:

Current wording

The following table provides a reconciliation of net (loss) income to adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024:

Previous wording

(1) Restructuring costs consist of employee costs and real estate exit costs. This includes depreciation and amortization of $0.1 million for the three and six months ended June 30, 2025 and $0.1 million and $0.2 million for the three and six months ended June 30, 2024, respectively.

Current wording

(1) Restructuring costs consist of employee costs and real estate exit costs. This includes depreciation and amortization of zero and $0.1 million for the three and nine months ended September 30, 2025 and zero and $0.2 million for the three and nine months ended September 30, 2024, respectively.

Previous wording

(2) 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 for the three and six months ended June 30, 2025 and $0.4 million and $0.5 million for the three and six months ended June 30, 2024, respectively.

Current wording

(2) 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 $0.1 million for the three and nine months ended September 30, 2025 and zero and $0.5 million for the three and nine months ended September 30, 2024, respectively.

Previous wording

Certain events may impact our liquidity such as the economic instability resulting in acute inflationary pressures, supply chain disruptions, changes in interest rates, new or increased tariffs, changes in equity markets and our utilization of reinsurance. There remains uncertainty around the future of inflation; elevated levels of inflation for an extended period could cause claims and claim expenses to increase, impact the performance of our investment portfolio or have other adverse effects. Conditions in the capital and credit markets, including instability and uncertainty, as well as broader economic factors such as the imposition of substantial tariffs and potential retaliatory tariffs, can also influence the returns, liquidity, valuation, and types of our investments. Additionally, fluctuations in interest rates could impact our cost of capital and may limit our ability to raise additional capital. We utilize reinsurance arrangements to grow our business in a capital-efficient manner and mitigate risk. Over time, our strategy continues to evolve and we may choose to amend, commute, and/or non-renew certain third-party reinsurance agreements, which may result in us retaining more or less of our business in the future. To the extent we retain a larger share of our book of business, our capital requirements may increase.

Current wording

Certain events may impact our liquidity, such as the economic instability resulting in acute inflationary pressures, supply chain disruptions, changes in interest rates, government shutdowns, new or increased tariffs, changes in equity markets and our utilization of reinsurance. There remains uncertainty around the future of inflation; elevated levels of inflation for an extended period could cause claims and claim expenses to increase, impact the performance of our investment portfolio or have other adverse effects. Conditions in the capital and credit markets, including instability and uncertainty, as well as broader economic factors such as government shutdowns or changes in tariff policy, including the imposition of new or retaliatory tariffs, can also influence the returns, liquidity, valuation, and types of our investments. Additionally, fluctuations in interest rates could impact our cost of capital and may limit our ability to raise additional capital. We utilize reinsurance arrangements to grow our business in a capital-efficient manner and mitigate risk. Over time, our strategy continues to evolve and we may choose to amend, commute, and/or non-renew certain third-party reinsurance agreements, which may result in us retaining more or less of our business in the future. To the extent we retain a larger share of our book of business, our capital requirements may increase.

Previous wording

We are organized as a holding company, but our primary operations are conducted by three of our wholly-owned insurance subsidiaries, Root Insurance Company and Root Property & Casualty Insurance Company, both Ohio-domiciled insurance companies, and Root Florida Insurance Company, a Florida-domiciled insurance company. The payment of dividends by our insurance subsidiaries is subject to restrictions set forth in the insurance laws and regulations of the State of Ohio and the State of Florida. Our domestic insurance subsidiaries are not permitted to pay any dividends without approval of the applicable superintendent, commissioner and/or director. During the six months ended June 30, 2025, the Ohio Department of Insurance approved Root Insurance Company to distribute two extraordinary dividends. As a result, $10.0 million has been distributed to Caret Holdings, Inc., its parent company, net of capital contributed to our regulated insurance entities.

Current wording

We are organized as a holding company, but our primary operations are conducted by three of our wholly-owned insurance subsidiaries, Root Insurance Company and Root Property & Casualty Insurance Company, both Ohio-domiciled insurance companies, and Root Florida Insurance Company, a Florida-domiciled insurance company. The payment of dividends by our insurance subsidiaries is subject to restrictions set forth in the insurance laws and regulations of the State of Ohio and the State of Florida. Our domestic insurance subsidiaries are not permitted to pay any dividends without approval of the applicable superintendent, commissioner and/or director. During the nine months ended September 30, 2025, the Ohio Department of Insurance approved Root Insurance Company to distribute three extraordinary dividends. As a result, over that period, $30.0 million has been distributed to Caret Holdings, Inc., its parent company, net of capital contributions made by Caret Holdings, Inc. to our regulated insurance entities.

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, 2025, Root Re was subject to compliance with certain capital levels and a net premiums earned to capital ratio up to 15:1, which we maintained as of June 30, 2025. The capital ratio can fluctuate at Root Re’s election, subject to regulatory approval. Root Re’s primary sources of funds are assumed insurance premiums, net investment income and capital contributions from the holding company. 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. During the six months ended June 30, 2025, Root Re distributed a dividend of $25.0 million to Caret Holdings, Inc., its parent 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, 2025, Root Re was subject to compliance with certain capital levels and a net premiums earned to capital ratio up to 15:1, which we maintained as of September 30, 2025. The capital ratio can fluctuate at Root Re’s election, subject to regulatory approval. Root Re’s primary sources of funds are assumed insurance premiums, net investment income and capital contributions from the holding company. 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. During the nine months ended September 30, 2025, Root Re distributed dividends of $50.0 million to Caret Holdings, Inc.

Previous wording

As of June 30, 2025, we had $641.4 million in cash and cash equivalents, of which $314.2 million was held outside of regulated insurance entities. We also had $322.7 million in marketable securities.

Current wording

As of September 30, 2025, we had $653.3 million in cash and cash equivalents, of which $308.5 million was held outside of regulated insurance entities. We also had $357.8 million in marketable securities.

Previous wording

Our cash and cash equivalents primarily consist of bank deposits and money market funds. Our marketable securities primarily consist of U.S. Treasury securities and agencies, municipal securities, corporate debt securities, and asset-backed securities.

Current wording

Our cash and cash equivalents primarily consist of bank deposits and money market funds. Our marketable securities primarily consist of U.S. Treasury securities, municipal securities, corporate debt securities, and asset-backed securities.

Previous wording

Tax withholding obligations arise upon vesting of shares of service-based restricted stock units, or RSUs, performance-based restricted stock units, and market-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. During the second quarter of 2025, we paid $16.3 million in tax withholding obligations arising from the vesting of shares of RSUs and market-based restricted stock units.

Current wording

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