UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2023~~2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_____to_____

Commission file number 001-39658

ROOT, INC.

(Exact name of Registrant as specified in its charter)


Delaware						84-2717903
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)
80 E. Rich Street, Suite 500 Columbus, Ohio						43215
(Address of principal executive offices)						(Zip Code)

(866) 980-9431

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.0001 par value per share	ROOT	The Nasdaq Stock Market LLC

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐☒ No ☒☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12-b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☒☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the registrant's Class A common stock, par value $0.0001 per share (the “Class A common stock”) held by non-affiliates was approximately $80513.35 million based upon the June 3028, ~~2023~~2024, closing price of $851.9461 as reported by the Nasdaq Global Select Market.

There were 911.62 million shares of Class A common stock and 54.0 million shares of Class B common stock outstanding as of February 1519, ~~2024~~2025.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this report incorporates by reference specific portions of the Registrant’s Notice of Annual Meeting and Proxy Statement relating to the Annual Meeting of Stockholders to be held on or about June 54, ~~2024~~2025.

ROOT, INC.

FORM 10-K

As of and For the Year Ended December 31, ~~2023~~2024

TABLE OF CONTENTS

		Page
Special Note Regarding Forward-Looking Statements
Risk Factors Summary
Part I.
Item 1.	Business	1
Item 1A.	Risk Factors	1617
Item 1B.	Unresolved Staff Comments	5558
Item 1C.	Cybersecurity	5659
Item 2.	Properties	5861
Item 3.	Legal Proceedings	5962
Item 4.	Mine Safety Disclosures	6063
Part II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	6164
Item 6.	[Reserved]	6265
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6366
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	8485
Item 8.	Financial Statements and Supplementary Data	8587
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	~~126~~134
Item 9A.	Controls and Procedures	~~127~~135
Item 9B.	Other Information	~~131~~138
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	~~132~~139
Part III.
Item 10.	Directors, Executive Officers and Corporate Governance	~~133~~140
Item 11.	Executive Compensation	~~134~~141
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~135~~142
Item 13.	Certain Relationships and Related Transactions, and Director Independence	~~136~~143
Item 14.	Principal Accountant Fees and Services	~~137~~144
Part IV.
Item 15.	Exhibits and Financial Statement Schedules	~~138~~145
Item 16.	Form 10–K Summary	~~142~~149
Signatures

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Annual Report on Form 10-K are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “path,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

•our ability to retain existing customers, acquire new customers and expand our customer reach;

•our expectations regarding our future financial performance, including total revenue, gross profit/ (loss), net income/ (loss), direct contribution, adjusted EBITDA, net loss and loss adjustment expense, or LAE, ratio, net expense ratio, net combined ratio, gross loss ratio, marketing costs and costs of customer acquisition, gross LAE ratio, gross expense ratio, gross combined ratio, operating expenses, quota share levels, changes in unencumbered cash balances and expansion of our new and renewal premium base;

•our ability to realize profits, acquire customers, retain customers, contract with additional partners to utilize the products, or achieve other benefits from our embedded insurance offering;

•our ability to expand our distribution channels through additional partnership relationships, digital media, independent agents and referrals;

•our ability to drive a significant long-term competitive advantage through our partnership with Carvana Group, LLC, or Carvana, and other partnerships;

•our ability to develop products for embedded insurance and other partners;

•the impact of supply chain disruptions, increasing inflation, a potential increase in tariffs or the implementation of new tariffs, a recession and/or disruptions to properly functioning financial and capital markets and interest rates on our business and financial condition;

•our ability to ~~reduce~~remain ~~operating~~profitable ~~losses~~ and extend our capital runway;

•our goal to be licensed in all states in the United States, or U.S., and the timing of obtaining additional licenses and launching in new states;

•the accuracy and efficiency of our telematics and behavioral data, and our ability to gather and leverage existing and additional data;

•our ability to materially improve retention rates and our ability to realize benefits from retaining customers;

•our ability to underwrite risks accurately and charge profitable rates;

•our ability to maintain our business model and improve our capital and marketing efficiency;

•our ability to drive improved conversion and decrease the cost of customer acquisition;

•our ability to maintain and enhance our brand and reputation;

•our ability to effectively manage the growth of our business;

•our ability to raise additional capital efficiently or at all;

•our ability to improve our product offerings, introduce new products and expand into additional insurance lines;

•our ability to cross sell our products and attain greater value from each customer;

•our lack of operating history and ability to attain profitability;

•our ability to compete effectively with existing competitors and new market entrants in our industry;

•future performance of the markets in which we operate;

•our ability to operate a “capital-efficient” business and obtain and maintain desirable levels of reinsurance;

•the effect of further reductions in the utilization of reinsurance, which would result in retention of more premium and losses and could cause our capital requirements to increase;

•our ability to realize economies of scale;

•our ability to attract, motivate and retain key personnel, or hire personnel, and to offer competitive compensation and benefits;

•our ability to deliver a vertically integrated customer experience;

•our ability to develop products that utilize telematics to drive better customer satisfaction and retention;

•our ability to protect our intellectual property and any costs associated therewith;

•our ability to develop an autonomous claims experience;

•our ability to take rate action early and react to changing environments;

•our ability to meet risk-based capital requirements;

•our ability to realize ~~the~~ benefits ~~anticipated~~ from our Texas county mutual fronting arrangement;

•our ability to expand domestically;

•our ability to ~~stay~~comply ~~in compliance~~ with laws and regulations that currently apply or become applicable to our business;

•the impact of litigation or other losses;

•changes in laws or regulations, or changes in the interpretation of laws or regulations by a regulatory authority, specific to the use of artificial intelligence, telematics data and the consent to use telematics data, connected card data, and other sources of data;

•our ability to defend against cybersecurity threats and prevent, or recover from, a security ~~breach~~incident or other significant disruption of our technology systems or those of our partners and third-party service providers;

•the effect of interest rates on our available cash and our ability to maintain compliance with our Amended Term Loan (as defined herein);

•our ability to maintain proper and effective internal control over financial reporting; and ~~remediate existing deficiencies;~~

•our ability to continue to meet Nasdaq listing standards; and

•the growth rates of the markets in which we compete.

You should not rely on forward-looking statements as predictions of future events. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described under the heading “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained herein. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Annual Report on Form 10-K relate only to events as of the date on which the statements are made and we undertake no obligation to update them to reflect events or circumstances after the date of this Annual Report on Form 10-K or to reflect new information or the occurrence of unanticipated events, except as required by law.

Unless the context otherwise indicates, references in this report to the terms “Root,” “the Company,” “we,” “our” and “us” refer to Root, Inc. and its subsidiaries.

We may announce material business and financial information to our investors using our investor relations website (ir.joinroot.com). We therefore encourage investors and others interested in Root to review the information that we make available on our website, in addition to following our filings with the Securities and Exchange Commission, or SEC, webcasts, press releases and conference calls.

Risk Factors Summary

Investing in our Class A common stock involves numerous risks and uncertainties, as more fully described below. You should read these risks before you invest in our Class A common stock. In particular, risks associated with our business include, but are not limited to, the following:

•We have a history of net losses and could ~~continue to~~ incur substantial net losses in the future. We may not be able to grow or achieve or maintain profitability in the future.

•We may lose our existing customers or fail to acquire new customers, including through our partnership channel, and our future growth and profitability depend in part on our ability to successfully operate in an insurance industry that is highly competitive. If we are unable to maintain the levels of customer service or continue technological innovation and improvements, our prospects for future growth may be materially adversely affected.

•We may require additional capital to support business growth or to satisfy our regulatory capital and surplus requirements, and this capital might not be available on acceptable terms, if at all.

•We rely on telematics, mobile technology and our digital platform to collect data points that we evaluate in pricing and underwriting our insurance policies, managing claims and customer support, and improving business processes. To the extent regulators prohibit or restrict our collection or use of this data, our business ~~could~~will be harmed.

•We may fail to maintain an effective partnership channel offering, including our embedded insurance product and our independent agent platform and/or fail to perform under the associated commercial arrangements.

•We depend on search engines, social media platforms, digital app stores, content-based online advertising and other online sources to attract consumers to our website and our mobile app both rapidly and cost-effectively. If these third parties change their listings or increase their pricing, if our relationships with them deteriorate or terminate, or if other factors related to these third parties arise which are beyond our control, we may be unable to attract new customers rapidly and cost-effectively, which would adversely affect our business, and results of operations and prospects.

•Operating system platforms and application stores controlled by third parties, such as Apple and Google, may change their terms of service or policies in a manner that increases our costs or impacts our ability to distribute our mobile app, collect data through it and market our products.

•Our expansion within the ~~United~~U.S. ~~States~~ will subject us to additional regulatory approvals and costs and risks, and our plans may not be successful.

•Our technology platform may not operate properly or as we expect it to operate and/or regulators may limit our ability to develop or implement our telematics-based pricing model and/or may eliminate or restrict the confidentiality of our proprietary technology.

•~~Regulators~~We ~~may~~are ~~limit~~subject ~~our~~to ~~ability~~full toscope ~~develop~~financial orexaminations ~~implement~~by state insurance regulatory authorities in each state in which our ~~telematics-based~~domestic ~~pricing~~insurance ~~model~~company subsidiaries are domiciled, and~~/or~~ market ~~may~~conduct ~~eliminate~~examinations orby ~~restrict~~state ~~the~~insurance ~~confidentiality~~regulatory ofauthorities in any state in which our ~~proprietary~~insurance ~~technology~~subsidiaries issue insurance policies, either of which could result in adverse examination findings and necessitate remedial actions.

•WeOur ~~are~~exposure ~~subject~~ to ~~full~~loss ~~scope~~activity ~~financial~~and ~~examinations~~regulation bymay ~~state~~be ~~insurance~~greater ~~regulatory authorities~~ in ~~Ohio,~~states where ~~each~~we ofcurrently ~~our~~have ~~domestic~~most ~~insurance~~of ~~company~~our ~~subsidiaries~~customers: ~~is domiciled~~Texas, ~~which~~Georgia ~~could result in adverse examination findings~~ and ~~necessitate remedial actions~~Florida.

•We are subject to ~~market~~stringent ~~conduct~~and ~~examinations~~changing byprivacy ~~state~~and ~~insurance~~data ~~regulatory~~security ~~authorities~~laws, inregulations, ~~any~~and ~~state~~standards inrelated ~~which~~to data privacy and security, increasing the complexity of compliance. Our actual or perceived failure to comply with such obligations could harm our ~~domestic~~reputation, ~~insurance~~subject ~~subsidiaries~~us ~~issue~~to ~~insurance~~significant ~~policies~~fines and liability, ~~which~~or ~~could~~adversely ~~result~~affect our business. In addition, data security incidents, or real or perceived errors, failures or bugs in ~~adverse~~our ~~examination~~or ~~findings~~our vendors’ systems or our website or app could impair our operations, compromise our confidential information or our customers’ personal information, damage our reputation and ~~necessitate~~brand, ~~remedial~~and ~~actions~~harm our business, financial condition, operating results and prospects.

•Our exposure to loss activity and regulation may be greater in states where we currently have most of our customers: Texas, Georgia and Colorado.

•We are subject to stringent and changing privacy and data security laws, regulations, and standards related to data privacy and security, increasing the complexity of compliance. Our actual or perceived failure to comply with such obligations could harm our reputation, subject us to significant fines and liability, or adversely affect our business.

•Data security breaches, or real or perceived errors, failures or bugs in our or our vendors’ systems or our website or app could impair our operations, compromise our confidential information or our customers’ personal information, damage our reputation and brand, and harm our business and operating results.

•Our brand may not become as widely known or accepted as incumbents’ brands or the brand may become tarnished.

•We rely on highly skilled and experienced personnel and if we are unable to attract, retain or motivate key personnel or hire qualified personnel, our business may be seriously harmed. In addition, the loss of key senior management personnel could harm our business, ~~and~~results ~~future~~of operations, financial conditions and prospects.

•New legislation or legal requirements may affect how we use artificial intelligence and/or impact how we communicate with our customers, which could have an adverse effect on our business ~~model~~, financial condition, ~~and~~ results of operations and prospects.

•Denial of claims or our failure to accurately and timely pay claims could materially and adversely affect our business, ~~financial condition,~~ results of operations, financial condition and prospects.

•Unexpected increases in the frequency or severity of claims, as well as increasing costs of social inflation and the legal environment, may adversely affect our business, results of operations, ~~and~~ financial condition and prospects.

•Failure to maintain our risk-based capital at the required levels could adversely affect our ability to maintain regulatory authority to conduct our business.

•We may be unable to prevent, monitor or detect fraudulent activity, including policy acquisitions or payments of claims that are fraudulent in nature, or fraud that may be perpetrated by employees or external parties.

•We rely on our mobile app to execute our business strategy. Government regulation of the internet and the use of mobile apps in particular is evolving, and unfavorable changes could seriously harm our business.

•Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand.

•Litigation and legal proceedings filed by or against us and our subsidiaries, ~~including shareholder litigation related to the initial public offering,~~ could have a material adverse effect on our business, results of operations, ~~and~~ financial condition and prospects, and may divert management’s attention and resources away from our business.

•Our ability to utilize our net operating loss ~~carry~~carryforwards ~~forwards~~ may be limited.

•The insurance business, including the market for automobile, ~~renters~~ and ~~homeowners~~renters insurance, is historically cyclical in nature, and we may experience periods with excess underwriting capacity and unfavorable premium rates, which could adversely affect our business.

•Retention of business written by us or through our Texas county mutual arrangement could expose us to potential losses. Further, reinsurance may be unavailable at current levels and prices, subjects us to counterparty risk and may not be adequate to protect us against losses.

•The inability to access our cash accounts or to convert investments into cash on favorable terms when we desire to do so may materially and adversely affect our business, cash flows and capital position.

•Failure to meet the continued listing requirements of Nasdaq Global Select Market, or Nasdaq, could result in delisting of our Class A common stock, which in turn would negatively affect the price of our Class A common stock and limit investors’ ability to trade in our common stock.

•Our Amended Term Loan includes a floating interest rate that exposes us to interest rate risk, and the terms of our Amended Term Loan place restrictions on our operating and financial flexibility. Our failure to comply with covenants contained in the Amended Term Loan may result in acceleration of our repayment obligations, which could harm our liquidity, financial condition, operating results, business and prospects and cause the price of our Class A common stock to decline.

PART 1.

Item 1. Business

Overview

Root is a technology insurance company ~~revolutionizing~~founded ~~personal~~on ~~insurance~~the ~~with~~idea athat ~~pricing~~car ~~model~~insurance ~~based~~rates ~~upon~~should ~~fairness~~be ~~and~~based aprimarily ~~modern~~on ~~customer~~driving ~~experience~~behaviors, not demographics. We ~~operate~~are ~~primarily~~revolutionizing athe ~~direct-to-consumer~~archaic ~~model~~car ininsurance ~~which~~industry ~~currently~~using wemobile ~~acquire~~technology ~~the~~and ~~majority~~data ofscience ~~our~~to ~~customers~~offer ~~through~~fair, ~~mobile~~personalized ~~apps~~rates to good drivers. We ~~are~~primarily ~~also~~reach ~~focused~~customers onthrough ~~expanding~~two channels: our ~~partnership~~Direct channel, where we ~~acquire~~target ~~customers~~consumers ~~using~~with ~~various~~what ~~means~~we believe to be a great insurance product at a great price, ~~including~~and through ~~embedded~~our ~~integrations~~partnership channel, where we meet consumers with our offering at contextually relevant times such as the car purchasing experience.

Our primary focus is on the U.S. auto insurance market, and we have built a company that recognizes each individual is unique and puts customers in control, rewarding them for their actions. For centuries, traditional insurance companies have grouped people into risk pools and long relied on the ‘law of large numbers’ to produce acceptable pricing on an aggregate basis. ~~Fairness at the individual level has been largely ignored.~~ Root is different—we have the ability to use technology to measure risk based on individual driving performance, prioritizing fairness to the customer. ~~The~~We ~~way we design and deliver insurance is not a simple tweak to the traditional insurance model—we~~ are fundamentally reinventing insurance through technology, data science and a deliberate focus on the customer experience.

We believe the ~~more than~~ $300 billion U.S. auto insurance market is ripe for disruption. Traditional methods of pooled risk assessment are not personalized and inherently less precise given individual behavioral data is underutilized or not widely measured as a component of the insurance risk assessment process. We believe traditional systems and processes have become outdated and are increasingly disconnected from the needs of consumers. Our initial focus on auto insurance was motivated by how well-suited we believe the product to be for fundamental improvement through technology. We believe Root is the innovator to drive this transformation.

Auto insurance is required for the vast majority of drivers in the U.S. and we believe it is typically the first insurance policy purchased by consumers. As a result, our auto-first strategy establishes the foundation for an expansive lifetime relationship with the opportunity to add other personal insurance lines as customer needs evolve.

The Root advantage is derived from our technology-enabled approach to the customer lifecycle. We engage with customers at a point of high intent across various channels, offer a product with significant ease of use and utilize data science to fairly price our policies. As a full-stack insurance carrier, we have the infrastructure and flexibility to design products and distribute, underwrite, administer and pay claims. Our model, supported by proprietary technology, allows us to be more adaptive across the value chain, provides ~~complete~~ design and feature discretion and we believe frees us to innovate and iterate more quickly than any of our major competitors. We view this flexibility as absolutely critical to introducing new capabilities, responding to macroeconomic trends, reinforcing customer centricity and driving growth at favorable unit economics. In practice this means we own and control an end-to-end insurance experience and have near complete operating autonomy, subject to regulation and agreements with our partners, to grow our business.

As we mature as an insurance company, a more significant portion of our premiums are expected to be earned from customer renewals. 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 a young insurance company, our results are disproportionately ~~weighed~~weighted toward new customers. Our data- and technology-driven approach allows for rapid response to macroeconomic trends through quick, appropriate rate actions. This, paired with our ability to continually enhance underwriting and segmentation ~~capabilities~~to price better drivers more fairly has contributed to ~~improvement~~stability in our gross loss ratios. ~~Over~~ time we anticipate, consistent with industry norms, that our portfolio will mature and a greater proportion of our premiums will be from customer renewals. We expect this growing proportion of renewal premiums will bring an increasing mix of lower loss ratio premiums and premiums with lower associated acquisition costs.

Our Industry

Insurance is one of the oldest and largest markets in the world, touching every corner of the world and protecting many of our most important assets. Our primary addressable market today is U.S. personal lines insurance. This market exceeded $488 billion in 2023 premiums and has grown at a 6% compound annual growth rate, or CAGR, since 2016.

Over the past century, there have been only a few waves of innovative disruption within insurance. ~~This~~Perhaps the most disruptive was the advent of the internet as a distribution channel in the late 1990s, which redefined the personal auto insurance market. ~~exceeded~~We ~~$428~~believe ~~billion~~the next technology-driven structural shift is underway—a large secular shift in ~~2022~~distribution ~~premiums~~with embedded insurance and ~~has~~a ~~grown~~holistic atchange ain 4%the ~~compound~~way ~~annual~~insurance ~~growth~~is ~~rate,~~priced orand ~~CAGR~~delivered, ~~since~~to ~~2016~~include individualized pricing based on telematics data.

Over the past century, there have been only a few waves of innovative disruption within insurance. Perhaps the most disruptive was the advent of the internet as a distribution channel in the late 1990s, which redefined the personal auto insurance market. We believe the next technology-driven structural shift is underway—a large secular shift in distribution with embedded insurance and a holistic change in the way insurance is priced and delivered.

We believe innovation has been slow within the property and casualty insurance industry, in part, because legacy systems are difficult to build upon and nearly impossible to replace. Also impacting the pace of innovation is institutional friction generated by the cost and perceived risk of a requisite ground-up technology rebuild, disruption of carrier-agent relationships and the business model implications of replacing broad pool-based pricing. Our proprietary technology and business model enable us to bypass these challenges.

Our Business Model

Customer Experience

We strive to meet customers where they are with a user-friendly interface and convenient, efficient experience. This is the mantra that drives our user experience and our business model. App installation and initial engagement are designed to be intuitive so that customers can easily identify the coverage they need.

Our mobile engagement extends across the customer experience and value chain:

•Engagement. ~~Many~~Most of our new customers come through our two distribution channels: direct and ~~partnerships~~partnership. We continue to diversify the ways we reach our customers. We believe meeting customers in the moment of need creates better customer engagement and access to a differentiated customer base.

•Profile Creation. The Root app is available for both iOS and Android operating systems making it available to 99% of U.S. smartphone users. ByA ~~simply scanning a driver’s license, a~~ prospective customer can ~~nearly~~quickly and easily complete a profile, part of an on-boarding process that takes mere minutes ~~and~~to ~~minimal keyboard interaction~~complete.

•Underwriting. The test drive is a key component of the underwriting process in certain channels. A two-to-four week test drive gathers and analyzes an individual’s data from smartphone sensors measuring braking, consistency, turning, time of day, driver attentiveness and other performance and contextual data. While telematics is core to our value proposition, some of our customers have an immediate insurance need, and as such, we are able to utilize traditional underwriting variables at policy origination, when needed. With this approach, we ~~are able to~~ leverage both traditional underwriting variables and the power of our proprietary telematics platform to offer ~~the~~good ~~best~~prices ~~price~~ to our best customers. As ~~more~~we ~~data~~collect ismore ~~collected~~data, ~~the predictive power of~~ our telematics’ ~~scores~~predictive power increases, allowing ~~for~~us to make further segmentation advances. We are also able to offer certain customers a price with the benefit of telematics data collected from other sources. For this reason, we view telematics as a better and more fair approach to underwriting.

•Coverage Selection. As part of profile setup, our app is designed to pre-~~populates~~populate with a customer’s owned automobiles and existing or prior coverage terms, allowing easy and seamless selection of policy terms.

•Policy Management. Once ~~bound~~purchased, customers can perform all policy management functions seamlessly from our app, including profile or coverage adjustments, obtaining proof of insurance or chatting with aan ~~bot~~automated assistant or human.

•Claims. We make it easy to file a claim and track ~~processing~~adjusting status through to settlement via the app, allowing us to ~~pay~~administer ~~out~~ claims more rapidly.

Auto insurance is a product most people use every day, reinforcing the importance of our mobile-first engagement strategy for both customer experience and data collection.

Distribution

We ~~opportunistically~~ distribute largely through ~~the~~our ~~mobile,~~direct ~~web~~ and partnership channels. ~~Mobile~~The direct channel includes mobile, which is the fastest growing retail channel in the ~~United States~~U.S., as customers spend less time in front of computers and utilize smart phones for more convenient shopping. To further differentiate access to our products, we are continuing to develop our partnership channel. The partnership channel emphasizes ease of use and minimal separation between intent and ~~bind while leveraging the platforms of our strategic partners. We believe that through a diverse and opportunistic customer acquisition strategy we can meet customers at a high point of intent.~~

bind while leveraging the platforms of our strategic partners. We believe that through a diverse customer acquisition strategy we can meet customers at a high point of intent with a pleasant experience.

•Direct: seamless experiences driven by performance marketing and organic traffic connecting consumers directly to the product.

◦Digital. Our direct digital channel is designed to drive volume by efficiently capturing high-intent customers. We accomplish this by meeting our customers within platforms they use extensively such as Google or select marketplace platforms where consumers are actively shopping for insurance. We deploy dynamic data science models to optimize advertising, targeting and bidding strategies across our digital platforms, aligning customer acquisition cost to expected lifetime value of the potential customer.

◦Referral. We encourage our existing customers to spread our value proposition. Our referral channel compensates existing customers who refer new customers who subsequently complete a test drive. This channel facilitates community-based growth to those who value our fair and transparent approach to insurance. This is our lowest cost acquisition channel and an important aspect of our ongoing distribution and brand strategy.

◦Channel Media. We build consideration and drive intent through household-level targeted media channels including direct mail, ~~billboards,~~ and ~~regional~~social ~~TV and radio~~media. We utilize these media channels to drive awareness when launching in new markets and to actively target customers in active states.

•~~Partnerships~~Partnership: a wide array of integrations, spanning early-stage marketing partnerships through fully embedded user experiences.

◦Embedded. We build upon or within the mobile and web customer experiences of distribution partners to reach a captive customer base with an embedded solution. With varying levels of connectivity, including our proprietary and fully-integrated application ~~programming~~which ~~interfaces,~~removes orthe ~~APIs,~~need wefor ~~are~~the ~~able~~customer to ~~engage~~ever ~~high~~visit ~~intent~~a ~~prospective~~Root ~~customers~~website into ~~contextually~~purchase ~~relevant~~and ~~third-party~~bind ~~applications~~a policy. While these partnerships take time to onboard and launch, over the long term, we believe our flexible technology stack ~~offers~~and investment in our platform seeks to optimize a seamless bind experience, creating a differentiated customer experience in this channel. We expect increased penetration of this channel over time as we seek to grow embedded relationships with other automotive and financial service technology companies with relevant customer bases.

◦Agency. We continue to invest in a product to bring the speed and ease of our technology to the independent agency channel. This channel provides access to a larger demographic of customers and we believe it has staying power. We developed an efficient quote and bind process through our agent platform that enables simplified distribution from agents to their customers. The technology driven approach makes this an appealing platform for agents and an efficient acquisition channel for us.

Our customer acquisition costs can vary by channel mix, by state, due to seasonality, or due to the competitive environment. We believe our distribution channels allow us to efficiently acquire customers in a contextually relevant, data-centric way. Our marketing spend is grounded in a disciplined data-science approach, targeting customers that align with our lifetime expected returns. Furthermore, we continue to invest in the technology and data science behind our distribution with A/B tests, dynamic bidding models, and rapid updates and iterations, supporting differentiated cost of customer acquisition over the long term.

~~Capital Management~~Reinsurance

As a full-stack insurance company, we ~~operate~~currently employ a “capital-efficient” ~~business~~ model, which utilizes a variety of reinsurance structures. These include excess of loss and quota share reinsurance. Excess of loss provides us with volatility protection against a portion of large individual losses or an aggregation of losses from catastrophes. Quota share provides, among other advantages, regulatory surplus relief for growing companies. ~~These~~We primarily utilize reinsurance ~~structures~~to ~~deliver~~mitigate ~~three~~the ~~core~~impact ~~objectives:~~of ~~(1)~~large ~~prioritize~~losses ~~revenue~~or ~~and~~tail ~~targeted~~events. ~~profitable~~We ~~customer~~continuously ~~growth~~evaluate ~~while~~our ~~also~~utilization ~~maintaining~~of ~~regulatory~~third-party ~~capital~~reinsurance ~~requirements;~~in ~~(2)~~order ~~source~~to ~~efficient~~operate a capital-efficient tobusiness ~~support~~model. ~~customer~~As ~~acquisition~~our ~~costs;~~gross ~~and~~loss ~~(3)~~ratios ~~mitigate~~have ~~impact~~stabilized ofwe ~~large~~strategically ~~losses~~reduced orthe ~~tail~~utilization ~~events.~~of ~~Together~~external ~~these~~quota ~~strategies~~share ~~serve~~ to ~~maximize~~balance ~~efficient~~the ~~use~~cost of reinsurance with capital-efficiency. asOver the long-term, we ~~grow~~expect to maintain the flexibility to modify our reinsurance program.

Reinsurance is a cornerstone of our capital management framework. We utilize a wholly-owned, Cayman Islands-based reinsurer, Root Reinsurance Company, Ltd., or Root Re. WeSeveral ~~also have multiple strategic business partnerships with~~ leading global reinsurers ~~who~~participate ~~offer~~in usour external reinsurance ~~solutions~~program.

Behavioral Data and Proprietary Telematics Models

WeFor the majority of our customers, we use technology to measure risk based on transparent collection and analysis of individual driving performance, which we believe is the most powerful predictor of ~~accidents~~losses and the leading variable in our underwriting model. By collecting and synthesizing massive amounts of rich, sensory behavioral data across thousands of driving variables, including distracted driving, we strive to price auto insurance based more on causality than correlation. While the notion of telematics has been around for decades, only recently has mobile technology made the concept adoptable at large scale.

The hallmark of our data advantage is our integrated set of actual claims and associated proprietary telematics, which we believe to be one of the largest in the market. We match miles tracked, on an individual basis, with actual claims and identify a set of driving performance factors that cause, or on a relative basis are more likely to cause, ~~accidents~~losses. We use an internally developed claims infrastructure to capture comprehensive structured data, contributing to our data advantage when combined with the telematics experience and ~~iterated~~iterate over time.

Our model ~~revolves~~uses ~~around using~~ integrated data and technology to create a pricing advantage through segmentation and has allowed us to respond quickly to macroeconomic trends. The data we collect feeds proprietary risk scoring models which assist us in identifying what we believe to be the riskiest drivers on the road, a group we have elected not to quote, thus avoiding a risk segment that is up to two times more likely to get in an accident than our average targeted customer. By ~~removing~~using ~~this~~such ~~high-risk~~powerful ~~segment~~segmentation, we can price ~~the~~better ~~remaining~~drivers ~~population~~ more fairly, resulting in a stronger conversion of customers whose behavioral data indicates lower risk than a market-standard demographic rating alone. This data advantage, combined with the machine learning approach to core elements of our technology stack, allows us to quickly identify loss trends and reflect this information faster in our rate filings. The resulting segmentation benefit allows for a better risk profile of our book over time, while delivering consistent value to our customers.

Our Strategy

We are focused on the following strategies to continue penetrating the more than $300 billion U.S. auto insurance market. In the near term, our primary focus is to execute on the auto opportunity at hand. In the longer-term, we plan to continue to develop additional growth opportunities through the expansion of product offerings.

•Execute the Auto Opportunity

◦~~Better,~~Accurate ~~fairer~~ pricing. We will never stop working to improve our ability to segment risk by increasing the influence of behavioral factors in our underwriting and pricing models. Our primary tool for improvement is to continue applying data science. Over time, we hope that we can replace most correlation-related inputs to our pricing model, such as credit scores, with acausal ~~fully~~inputs ~~behavioral~~like ~~pricing~~driving ~~model~~behavior. We ~~would~~believe ~~view~~that ~~this~~modern asquantitative ~~the~~methods ~~ultimate~~combined ~~achievement~~with insystematic ~~customer~~decision-making ~~transparency~~leads to more effective risk management and, ~~fairness~~ultimately, lower prices for our customers.

◦Enhance marketing efficiency. We will continue to enhance the efficiency of our marketing spend through data science and dynamic bidding and targeting strategies.

◦Expand partnership ~~experience~~network. We ~~plan~~will to continue to leverage our technology to embed with prospective strategic partners and bring the speed and ease of our technology to multiple channels, including independent agent platforms. Integrating our auto insurance solutions into partner platforms allows us to engage prospective customers at contextually relevant times. These arrangements involve varying degrees of integration, including our fully integrated embedded product utilized with some partners, such as Carvana. Over time, we expect increased penetration of this channel as we seek to partner across additional automotive, financial services, ~~and additional~~ affinity ~~channels~~, ~~offering~~and ~~access~~independent toagency ~~additional customer bases~~channels.

◦Grow national auto insurance presence. We will continue to focus on domestic growth by diversifying distribution channels, ~~becoming~~and ~~active~~launching inadditional ~~more~~ states ~~while improving brand awareness~~. ~~In instances where a prospective customer solicits a quote in a state where we do not currently underwrite, we retain their contact information, with permission, and re-engage upon state entry.~~

We may selectively pursue additional investments, acquisitions and partnerships to accelerate any of our growth and profitability objectives or to improve our competitive positioning within existing and new products.

Investments

Our portfolio of investable assets is primarily held in cash, cash equivalents and available-for-sale fixed maturity securities, including U.S. Treasury securities, corporate debt securities, ~~mortgage~~asset-backed securities, ~~municipal securities~~ and ~~other~~municipal ~~debt obligations~~securities. We manage the portfolio in accordance with investment policies and guidelines approved by our board of directors. We have designed our investment policy and guidelines to provide a balance between current yield, conservation of capital, and liquidity requirements of our operations. We set guidelines that provide for a well-diversified investment portfolio that is compliant with insurance regulations applicable to the states in which we operate. For further information, see Note 3, “Investments,” in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

Competition

The insurance industry in which we operate is highly competitive. ~~Many~~Several of our primary competitors ~~have~~spend billions of dollars on annual marketing initiatives to create well-established national brands ~~and market similar products~~. Our competitors include large national insurance companies such as ~~Geico~~GEICO, Progressive and Allstate, as well as ~~up-and-coming companies and~~ new market entrants in the insurtech industry, some of which also utilize telematics and offer forms of usage-based insurance. ~~Several~~The ~~of these~~ established national insurance companies ~~are larger than us and~~ have ~~significant competitive advantages over us, including~~ increased name recognition, higher financial ratings, greater resources, additional access to capital, and more lines of insurance coverage to offer. Indue ~~particular,~~to ~~many~~their time in market. Many of these competitors offer consumers the ability to purchase multiple other lines of insurance coverage and “bundle” them together ~~into~~for ~~one~~discounts ~~policy~~ and, in certain circumstances, include an umbrella liability policy for additional coverage at competitive prices. Moreover, as we expand into new lines of business and offer additional products, we could face intense competition from traditional insurance companies that are already established in such markets and product offerings.

Competition is based on many factors, including the reputation and experience of the insurer, coverages offered, pricing and other terms and conditions, customer service, claims experiences, size, and financial strength ratings, among other considerations. We believe that we compete favorably across many of these factors and have developed a platform and business model based on behavioral data collection and machine learning that will be difficult for incumbent insurance providers to emulate.

Intellectual Property

We believe that our intellectual property rights are valuable and important to our business. We rely on trademarks, patents, copyrights, trade secrets, license agreements, intellectual property assignment agreements, confidentiality procedures, non-disclosure agreements, and employee non-disclosure and invention assignment agreements to establish and protect our proprietary rights. Though we rely in part upon these legal and contractual

~~protections,~~Intellectual ~~we believe that factors such as the skills and ingenuity of our employees and the functionality and frequent enhancements to our platform are larger contributors to our success in the marketplace.~~Property

AsWe ofbelieve ~~December 31~~that our intellectual property rights are valuable and important to our business. We rely on trademarks, ~~2023~~patents, wecopyrights, ~~had~~trade ~~eight~~secrets, ~~issued~~license ~~patents~~agreements, ~~six~~intellectual property assignment agreements, confidentiality procedures, non-~~provisional~~disclosure ~~patent~~agreements, ~~applications~~and employee non-disclosure and ~~four~~invention ~~continuation~~assignment ~~applications~~agreements ~~pending~~to ~~examination~~establish inand ~~the~~protect ~~United~~our ~~States~~proprietary rights. WeThough ~~continually~~we ~~review~~rely ~~our~~in ~~development~~part ~~efforts~~upon tothese ~~assess~~legal and contractual protections, we believe that factors such as the ~~existence~~skills and ~~patentability~~ingenuity of ~~new~~our ~~intellectual~~employees ~~property~~and the functionality and frequent enhancements to our platform are larger contributors to our success in the marketplace.

WeAs ~~have~~of ~~trademark~~December 31, ~~rights~~2024, inwe ~~our~~had ~~name,~~eight ~~our~~issued ~~logo~~patents, ~~and~~six ~~other~~non-provisional ~~brand~~patent ~~indicia,~~applications and ~~have~~four ~~trademark~~continuation ~~registrations~~applications ~~for~~pending ~~select~~examination ~~markets~~ in the ~~United States~~U.S. We ~~also~~continually ~~have~~review ~~registered~~our ~~domain~~development ~~names~~efforts ~~for~~to ~~websites~~assess ~~that~~the weexistence ~~use~~and inpatentability ~~our~~of ~~business~~new intellectual property.

We ~~intend~~have totrademark ~~pursue~~rights ~~additional~~in ~~intellectual~~our ~~property~~name, ~~protection~~our tologo, ~~the~~and ~~extent~~other webrand ~~believe~~indicia, ~~it would be beneficial~~ and ~~cost-effective.~~have ~~Despite~~trademark ~~our~~registrations ~~efforts~~for toselect ~~protect~~markets ~~our intellectual property rights, they may not be respected~~ in the ~~future~~U.S. orand ~~may be invalidated, circumvented, or challenged~~Canada. ~~For~~We ~~additional~~also ~~information,~~have ~~see~~registered ~~the~~domain ~~section~~names ~~titled~~for ~~“Risk~~websites ~~Factors—Risks~~that ~~Related~~we touse ~~Our~~in ~~Business—Our intellectual property rights are valuable, and any inability to protect them could reduce the value of~~ our ~~products, services and brand~~business.”

We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost-effective. Despite our efforts to protect our intellectual property rights, they may not be respected in the future or may be invalidated, infringed, circumvented, or challenged. For additional information, see the section titled “Risk Factors—Risks Related to Our Business—Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand.”

People Team

As a technology company, we view strong talent as one of our differentiating factors. We believe our employees’ knowledge, skills, and the way they work provide a distinct competitive advantage allowing us to innovate, move with speed and bring subject matter expertise to the market for our customers and shareholders.

Our mission is to ~~fundamentally~~ reinvent insurance through a commitment to technology and data science. We aim to empower better lives through better insurance. Our team members achieve this mission with a focus on customer value, experimentation and ~~invention~~innovation, disciplined thinking, and operational excellence. These four principles form the basis of our management approach and performance review model, ensuring clear expectations, meaningful mentorship and powerful growth.

We strive to create an empowering work environment and experience for each of our team members. We understand that a team with diverse backgrounds and perspectives delivers better insights and outcomes, enables ~~innovation~~creativity, and fosters a greater understanding of our customers. Our efforts to create aan ~~diverse and~~ inclusive workspace, ~~particularly in the tech sector,~~ are focused on talent acquisition and development, education and training, feedback and collaboration, and strategic planning aimed at consistent growth.

Employees

As of December 31, ~~2023~~2024, we had ~~680~~1,021 full-time employees. None of our employees are represented by a labor union or covered by collective bargaining agreements. In ~~2023~~2024, we focused on retaining the talent required to execute our strategic plan, improving our operating efficiency and operating costs, prioritizing our resources to further strengthen our pricing and underwriting foundation and continuing development and distribution of our insurance products. Furthermore, we implemented several training initiatives to help support our employees. This includes a monthly management skills series training, designed to cover relevant topics such as performance reviews, difficult conversations, and employment law. Overall, these programs have been positively received and we plan to expand our training offerings throughout 2025.

Ethics and Company Values

In addition to applicable laws and regulations, our Code of Conduct, company values and policies provide the grounding for our ethical framework. Employees are encouraged to report any unusual behavior or any non-compliant activities through a variety of vehicles to include our anonymous reporting system. On an annual basis, we provide compliance training to, and require acknowledgement of our Code of Conduct and other key policies by, every employee. We strive to ensure our new employees know how and what to report. We have an open-door policy that allows employees to reach out to leaders, our People team, our Legal team, our Compliance team and/or Internal Audit teams to ensure that their concerns are communicated and addressed.

Ethics and Company Values

In addition to applicable laws and regulations, our code of conduct, company values and policies provide the grounding for our ethical framework. Employees are encouraged to report any unusual behavior or any non-compliant activities through our anonymous reporting system. On an annual basis, we provide compliance training to, and require acknowledgement of our code of conduct and other key policies by, every employee. We strive to ensure our new employees know how and what to report. We have an open-door policy that allows employees to reach out to leaders, our people team, our legal team, our compliance team and/or internal audit to ensure that their concerns are communicated and addressed.

Hiring and Retaining Talent

We are continually working on building a culture of attraction and retention of key talent. We recruit nationally to attract the best talent to innovate and meet the needs of our customers in a multitude of ways. Our focus on employee engagement continues with employee surveys and feedback opportunities to create action plans to address needs. Our performance development process aims to ensure that employees receive timely and actionable feedback, enables performance improvement where necessary, and ~~providing~~provides employees the opportunity to voice their career aspirations.

In addition, we seek to provide competitive pay and benefits through a combination of fixed and variable compensation programs. We have set salary ranges, based on our defined competitive markets, and our annual short-term incentive and discretionary long-term incentive programs are aligned to each of our positions asthrough wemarket ~~believe are appropriate~~analysis. Our executives and senior leadership roles, along with several identified roles throughout the business participate in a long-term equity-based incentive program. We believe this strongly supports a long-term view and pay for performance that is aligned with our shareholders’ expectations. Our benefit offering includes medical, dental, vision, prescription drug benefits, ~~along~~an ~~with a robust~~ employee assistance program, life insurance, short- and long-term disability, paid time off and paid parental leave.

Insurance Regulation

We are subject to insurance regulation in the jurisdictions in which we hold licenses and transact insurance through our licensed insurance carriers and producer subsidiaries in the ~~United States~~U.S. Insurance regulatory authorities have broad authority to regulate all aspects of an insurance carrier or producer’s business in each state, including the powers to restrict or revoke licenses to transact business, and to levy fines and monetary penalties against insurers and insurance producers found to be in violation of applicable laws and regulations. Regulations to which our licensed insurance carriers and producer subsidiaries are subject include, but are not limited to:

•prior approval of transactions resulting in a change of “control” (as such term is defined under the Insurance Holding Company System Regulatory Act of Ohio, or the Ohio Holding Company Act);

•approval of policy forms and premiums;

•approval of intercompany agreements;

•statutory and risk-based capital solvency requirements, including the minimum capital and surplus our regulated insurance subsidiaries must maintain;

•establishing minimum reserves that insurance carriers must hold to pay projected insurance claims;

•required participation by our regulated insurance subsidiaries in state guaranty funds;

•restrictions on the type and concentration of our regulated insurance subsidiaries’ investments;

•restrictions on the advertising and marketing of insurance;

•restrictions on the adjustment and settlement of insurance claims;

•restrictions on the use of rebates to induce a policyholder to purchase insurance;

•restrictions on the sale, solicitation and negotiation of insurance;

•restrictions on the sharing of insurance commissions and payment of referral fees;

•prohibitions on the underwriting of insurance on the basis of race, sex, religion and other protected classes;

•restrictions on our ability to use telematics to underwrite and price insurance policies, particularly in California;

7•restrictions on the ability of our regulated insurance subsidiaries to pay dividends to us or enter into certain related-party transactions without prior regulatory approval;

•restrictions on the ability of our regulated insurance subsidiaries to pay dividends to us or enter into certain related party transactions without prior regulatory approval;

•rules requiring the maintenance of statutory deposits for the benefit of policyholders;

•privacy regulation and data security;

•regulation of corporate governance and risk management;

•periodic examinations of operations, finances, market conduct and claims practices; and

•required periodic financial reporting.

The business of insurance is almost entirely regulated at the state level, and the laws and regulations to which we are subject vary depending on the state. Unless the context otherwise requires, references herein to “state” include any of the 50 states, the District of Columbia and certain U.S. territories. These laws and regulations are subject to change as state legislatures and regulatory agencies update their authority to address real and perceived issues and concerns. These laws and regulations are also subject to interpretation by courts. The National Association of Insurance Commissioners, or NAIC, and the National Council of Insurance Legislators, are the principal organizations tasked with establishing standards and best practices across the various states, the District of Columbia and five U.S. territories, and from time to time promulgate model rules and regulations that often are the basis for insurance rules and regulations adopted by such jurisdictions. While we currently operate in 3435 states, we would need to obtain regulatory approval, including with respect to the regulations described above, before offering our products in new markets. We cannot predict precisely whether or when regulatory actions may be taken that could adversely affect us, the operations of our regulated insurance subsidiaries, or our ability to expand our operations into new markets. Interpretations by regulators may change and laws, regulations and interpretations may be applied with retroactive effect, particularly in areas such as accounting or reserve requirements.

Required Licensing

We have ~~two~~three wholly-owned regulated U.S. insurance subsidiaries, Root Insurance Company, ~~and~~ Root Property & Casualty Insurance Company, or Root Property & Casualty, and Root Florida Insurance Company, or Root Florida. Collectively, these are our insurance subsidiaries. Root Insurance Company, an Ohio-domiciled insurer, is admitted in the state of Ohio to transact certain lines of property and casualty insurance, maintains licenses to transact insurance in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Washington and West Virginia. Root Property & Casualty is also domiciled in Ohio and licensed in all 50 states and the District of Columbia to transact certain lines of property and casualty insurance. Root Florida is domiciled in Florida and was formed to transact certain lines of property and casualty insurance. Root Florida was incorporated in early 2025 and is a wholly-owned subsidiary of Root Property & Casualty. The Ohio Department of Insurance, or the Ohio DOI, is ~~our~~the primary state insurance regulator for Root Insurance Company and Root Property & Casualty and Root Florida’s primary regulator is the Florida Office of Insurance Regulation, or the FOIR.

We also have a reinsurance captive subsidiary, Root Re, domiciled in the Cayman Islands.

Our licensed insurance producer subsidiaries, Root Insurance Agency, LLC, Root Lone Star Insurance Agency, LLC, and Root Scout, LLC, must maintain an insurance producer license in every state in which they sell, solicit or negotiate insurance. Root Insurance Agency, LLC currently holds a resident insurance producer license in Ohio and a non-resident license in the District of Columbia and 45 states, which does not include California, Florida, Massachusetts and New York. Root Lone Star Insurance Agency, LLC currently holds a resident managing general agency license in Texas. Root Scout, LLC currently holds a resident insurance producer license in Ohio and a non-resident license in the District of Columbia, and the remaining 49 states.

Insurance regulators have broad authority to restrict or revoke licenses of insurance carriers and producers who are found to be in violation of any applicable laws and regulations. In addition, we must obtain additional regulatory approvals before offering our products in markets where we do not currently operate.

~~Licensing~~Our licensed insurance producer subsidiaries, Root Insurance Agency, LLC, Root Lone Star Insurance Agency, LLC, and Root Scout, LLC, must maintain an insurance producer license in every state in which they sell, solicit or negotiate insurance. Root Insurance Agency, LLC currently holds a resident insurance producer license in Ohio and a non-resident license in the District of ~~Our~~Columbia ~~Employees~~and 47 states, which does not include Florida, Massachusetts and New York. In Florida, Root Insurance Agency, LLC holds an agency license and an independent adjusting firm license and will be appointed as a managing general agent for Root Florida. Root Lone Star Insurance Agency, LLC currently holds a resident managing general agency license in Texas. Root Scout, LLC currently holds a resident insurance producer license in Ohio and a non-resident license in the District of Columbia, and the remaining 39 states, which does not include Alabama, Alaska, Arkansas, Illinois, Massachusetts, Minnesota, Nevada, New Mexico, Washington, and West Virginia.

~~Any~~Insurance ofregulators ~~our~~have ~~employees~~broad ~~who~~authority ~~sell,~~to ~~solicit~~restrict or ~~negotiate~~revoke ~~insurance~~licenses ~~must~~of beinsurance ~~licensed~~carriers and ~~appointed~~producers ~~insurance~~who ~~producers~~are ~~and~~found ~~must~~to ~~fulfill~~be ~~annual~~in ~~continuing~~violation ~~education~~of ~~requirements.~~any Inapplicable ~~certain~~laws ~~states~~and inregulations. ~~which~~In addition, we ~~operate,~~must ~~insurance~~obtain ~~claims~~additional ~~adjusters~~regulatory ~~are~~approvals ~~also~~before ~~required~~offering toour beproducts ~~licensed~~in ~~and~~markets ~~fulfill~~where ~~annual~~we ~~continuing~~do ~~education~~not ~~requirements~~currently operate.

Required Licensing of Independent Agents and Our Employees

Any of the independent agents who sell, solicit or negotiate insurance on our behalf must be licensed and appointed insurance producers and must fulfill annual continuing education requirements. Similarly, any of our employees who sell, solicit or negotiate insurance must be licensed and appointed insurance producers and must fulfill annual continuing education requirements. In certain states in which we operate, insurance claims adjusters are also required to be licensed and fulfill annual continuing education requirements.

Insurance Holding Company Regulation

As the ultimate controlling person in the “insurance holding company system” under the Ohio Holding Company Act, we are required to file annual enterprise risk reports, corporate governance disclosures and ~~own~~Own ~~risk~~Risk ~~solvency~~and ~~assessments~~Solvency Assessments, or ORSAs, with our domiciliary regulators. Moreover, in Ohio for example, any person divesting control of an insurer must provide 30 days’ notice to the regulator and the insurer.

Under the Ohio Holding Company Act, all inter-affiliate transactions within a holding company system must meet the following conditions: (i) the terms must be fair and reasonable; (ii) charges or fees for services performed must be fair and reasonable; and (iii) expenses incurred and payments received must be allocated to the insurer in conformity with customary insurance accounting practices consistently applied. We generally must disclose any transaction between our regulated insurance subsidiaries and our other affiliates to the supervisory Department of Insurance, or DOI, and obtain prior approval from such DOI before entering into certain material inter-affiliate transactions, including, but not limited to, management agreements, tax allocation agreements, service contracts, cost-sharing arrangements, extraordinary dividends, certain reinsurance transactions and certain loan agreements.

Change of Control

Pursuant to the Ohio Holding Company Act, a person must seek regulatory approval from the superintendent of the supervisory DOI prior to acquiring direct or indirect “control” of a domestic insurer by filing a Form A Statement Regarding the Acquisition of Control of or Merger with a Domestic Insurer. As part of this Form A application, the entity acquiring control (as well as any controlling shareholders of such entity) will need to submit, along with other documents and disclosures, its financial statements, organizational charts and biographical affidavits for any officers, directors and controlling shareholders of each applicable entity. The superintendent of the DOI will grant approval of an application to acquire control of a domestic insurer unless, after a public hearing, the superintendent finds that any of the following apply: (i) after the change of control, the domestic insurer would not be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed; (ii) the effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in the applicable state or tend to create a monopoly; (iii) the financial condition of any acquiring party is such as might jeopardize the financial stability of the domestic insurer, or prejudice the interests of its policyholders; (iv) the plans or proposals that the acquiring party has to liquidate the domestic insurer, sell its assets, or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are unfair and unreasonable to policyholders of the domestic insurer and not in the public interest; (v) the competence, experience and integrity of the persons that would control the operation of the domestic insurer are such that it would not be in the interest of policyholders of the domestic insurer and of the public to permit the merger or other acquisition of control; or (vi) the acquisition is likely to be hazardous or prejudicial to the insurance-buying public.

The Ohio Holding Company Act provides that control over a domestic insurer is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, ten percent or more of the voting securities of the domestic insurer. A person may rebut this statutory presumption of control by submitting a disclaimer of affiliation with the supervisory DOI, disclosing all material relationships and bases for affiliation between the person and the insurer as well as the basis for disclaiming such affiliation. The state regulators, however, may also find that “control” exists in circumstances in which a person owns or controls less than ten percent of the voting securities of the domestic insurer.

~~titled~~structure ~~“Risk~~or ~~Factors—Risks~~management, ~~Related~~are unfair and unreasonable to ~~Ownership~~policyholders of ~~Our~~the ~~Class~~domestic Ainsurer ~~Common~~and ~~Stock—Applicable~~not ~~insurance~~in ~~laws~~the ~~may~~public ~~make~~interest; (v) the competence, experience and integrity of the persons that would control the operation of the domestic insurer are such that it ~~difficult~~would not be in the interest of policyholders of the domestic insurer and of the public to ~~effect~~permit athe ~~change~~merger or other acquisition of control; or (vi) the acquisition is likely to be hazardous or prejudicial to the insurance-buying public.”

These change of control regulations may dissuade investors from acquiring a controlling stake in our company, including through transactions that some or all of our stockholders might consider to be desirable. Such regulations may also inhibit our ability to acquire an insurance company should we wish to do so in the future. See the section titled “Risk Factors—Risks Related to Ownership of Our Class A Common Stock—Applicable insurance laws may make it difficult to effect a change of control.”

ORSA

Pursuant to the Own Risk and Solvency Assessment, or ORSA, an insurance company with gross written and unaffiliated assumed premium of more than $500 million or that is part of an insurance group with gross written and unaffiliated assumed premium of more than $1 billion must maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing, and reporting on its material and relevant risks. In addition, the insurer must regularly conduct an own risk and solvency assessment in accordance with NAIC’s ORSA Guidance Manual. Upon the request of the superintendent of the Ohio DOI, and not more than once a year, an insurer must submit an ORSA summary report, or any combination of reports that together contain the information described in the ORSA Guidance Manual, with respect to the insurer and the insurance group of which it is a member. Root Insurance Company became subject to ORSA in 2020 since it had gross written and unaffiliated assumed premium in excess of $500 million for that year and its first assessment was due prior to the end of fiscal year 2021. Root, Inc. has filed its ~~first~~ ORSA summary ~~report~~reports with the Ohio DOI onannually ~~December~~since ~~30,~~ 2021, and ~~has~~will ~~filed~~file ~~annually~~its ~~thereafter~~2024 ORSA summary report by the end of the first quarter in 2025.

Restrictions on Paying Dividends

We are a holding company that transacts a majority of its business through operating subsidiaries. Consequently, our ability to pay dividends to stockholders and meet our debt payment obligations depends on the results of operations of our operating subsidiaries and on the ability of such subsidiaries to provide us with cash, whether in the form of dividends, distributions, loans or otherwise. The payment of any extraordinary dividend by one of our regulated insurance subsidiaries requires the prior approval of the superintendent of the supervisory DOI. “Extraordinary dividend” is defined under ~~the~~applicable ~~Code~~state law as: (i) any dividend or distribution of cash or other property whose fair market value, together with that of other dividends or distributions made within the preceding twelve months, exceeds the greater of (a) ten percent of an insurer’s policyholder surplus as of December 31 of the preceding year, or (b) an insurer’s net income for the twelve-month period ending December 31 of the preceding year or (ii) any dividend or distribution paid by an insurer from a source other than earned surplus. As of December 31, ~~2023~~2024, ~~neither~~none ~~Root~~of ~~Insurance~~our ~~Company~~insurance ~~nor~~subsidiaries ~~Root~~requested ~~Property~~approval &or ~~Casualty~~review ~~were~~of ~~permitted~~the supervisory DOI to ~~pay~~issue any ~~dividends~~extraordinary toor usordinary ~~without~~dividends. ~~approval~~Root ofRe ~~the~~is ~~superintendent~~permitted ofto ~~the~~pay ~~supervisory DOI~~dividends. See the section titled “Risk Factors—Risks Related to Our Business— Failure to maintain our risk-based capital at the required levels could adversely affect our ability to maintain regulatory authority to conduct our business.”

In addition, insurance regulators have broad powers to prevent a reduction of statutory surplus to inadequate levels, and there is no assurance that dividends of the maximum amount calculated under any applicable formula would be permitted. The Ohio DOI may in the future adopt statutory provisions more restrictive than those currently in effect.

Reserves

Our domestic insurance subsidiaries are required to hold ~~admitted assets as~~ reserves to cover projected losses under its policies, in accordance with actuarial principles. In accordance with NAIC’s property and casualty statement instructions, they must submit an annual Statement of Actuarial Opinion from a qualified actuary appointed by the Company, certifying that its reserves are reasonable.

Risk-Based Capital and Group Capital

State insurance regulators establish and monitor compliance with capital and surplus requirements. Our domestic insurance subsidiaries are ~~required~~therefore subject to ~~maintain~~certain ~~minimum~~capital ~~levels~~restrictions ofand requirements including risk-based capital, or RBC, developed by the NAIC and adopted by state insurance regulators to support their overall business operations and minimize the risk of insolvency. RBC is calculated using a series of factors applied against financial balances and activity. State insurance regulators use ~~risk-based~~RBC ~~capital~~ to set capital requirements, based on the size and degree of risk taken by the insurer, taking into account various risk factors including asset risk, credit risk, underwriting risk, and interest rate risk. AsIf the ratio of an insurer’s total adjusted capital and surplus decreases relative to its ~~risk-based capital~~RBC, the ~~risk-based~~RBC ~~capital~~ laws provide for increasing levels of regulatory scrutiny and intervention.

10An insurance company with total adjusted capital that is less than 200% of its authorized control level RBC is at a company action level, which would require the insurance company to file a RBC plan that, among other things, contains proposals of corrective actions the Company intends to take that are reasonably expected to result in the elimination of the company action level event. Given the relatively short operating history of our insurance subsidiaries, certain state insurance regulators require our insurance subsidiaries to maintain RBC levels in excess of 200% of its authorized control level. As of December 31, 2024, both Root Insurance Company and Root Property & Casualty’s RBC levels are above the company action levels.

~~Ohio~~In ~~has~~addition, ~~adopted~~ the ~~model legislation promulgated by the~~ NAIC ~~pertaining~~has todeveloped ~~risk-based capital and requires annual reporting by insurers to confirm that the insurers are meeting their risk-based capital requirements. Insurers falling below~~ a ~~risk-based~~group capital ~~threshold~~calculation ~~may~~covering beall ~~subject~~entities toin ~~varying~~our ~~degrees of regulatory action. An~~ insurance company with total adjusted capital that is less than 200% of its authorized control level risk-based capital is at a company action level, which would require the insurance company to file a risk-based capital plan that, among other things, contains proposals of corrective actions the Company intends to take that are reasonably expected to result in the elimination of the Company action level eventgroup. ~~Additional~~The ~~action~~group ~~level events occur when the insurer’s total adjusted~~ capital ~~falls~~calculation ~~below~~provides ~~150%,~~regulators ~~100%~~with ~~and~~an ~~70%~~additional ofanalytical ~~its~~tool ~~authorized~~for ~~control~~conducting ~~level~~supervisory ~~risk-based capital~~activities. ~~When~~As ~~total adjusted capital falls below 70%, a mandatory control event is triggered which results in the supervisory DOI placing the insurance company in receivership and assuming control~~ of ~~the operations of the insurer. Root~~December 31, ~~Inc. entered into an agreement with the Superintendent of Insurance~~2024, ~~State of~~ Ohio, oradopted the ~~Superintendent~~model legislation, ~~guaranteeing~~which ~~that Root Insurance Company~~ will ~~maintain~~become ~~certain~~effective ~~capital~~June ~~and surplus requirements or risk-based capital levels~~1, ~~whichever~~2025 isfor ~~greater,~~those ~~and~~insurance ~~such~~holding ~~additional~~company ~~surplus~~systems asthat ~~the~~do ~~Superintendent~~not ~~requires.~~write ~~The~~business ~~guarantee~~outside ~~remains~~of ~~in effect until such time as~~ the ~~Superintendent may release Root, Inc~~U. ~~in writing~~S. ~~As of December 31~~, ~~2023,~~like ~~both Root Insurance Company and Root Property & Casualty’s risk-based capital levels are above any of these regulatory action level thresholds and our guaranteed threshold~~us.

In addition, the NAIC has developed a group capital calculation covering all entities in our insurance company group for us in solvency monitoring activities. The group capital calculation provides regulators with an additional analytical tool for conducting supervisory activities. As of December 31, 2023, Ohio adopted the model legislation, which will become effective June 1, 2025 for those insurance holding company systems that do not write business outside the United States, like us.

Hazardous Financial Conditions

Our insurance regulatory authorities have the authority to deem our domestic insurance subsidiaries to be in a hazardous financial condition such that the insurer’s continued operation may be hazardous to its policyholders, creditors, or the general public. A finding of a hazardous condition can be based upon a number of factors, including, but not limited to: (i) adverse findings in a financial, market conduct or other examination; (ii) failure to maintain adequate reserves in accordance with presently accepted actuarial standards of practice; (iii) net loss or negative net income in the last twelve month period or any shorter period of time; (iv) failure to meet financial and holding company filing requirements; (v) insolvencies with a company’s reinsurer(s) or within the insurer’s insurance holding company system; (vi) a finding of incompetent or unfit management of the insurer; (vii) a failure to furnish requested information or provide accurate information in relation to a response to an inquiry or filing of a financial statement; and (viii) any other finding determined by the commissioner to be hazardous to the insurer’s policyholders, creditors or general public.

If an insurance regulatory authority finds one of our domestic insurance subsidiaries to be in hazardous condition it has the authority, in lieu of placing the insurer into supervision, rehabilitation or liquidation, to enter into a memorandum of understanding with the insurer or issue an order to require the insurer to remedy the hazard. This would include, but is not limited to, ordering the insurer to: (i) increase its capital and surplus, (ii) suspend payments of dividends, (iii) limit or withdraw from certain investments, (iv) correct corporate governance deficiencies and (v) take any other action necessary to cure the hazardous condition.

Periodic Examinations

Our insurance subsidiaries are subject to on-site visits and financial and/or market conduct examinations by state insurance regulatory authorities. We are subject to financial condition examinations in any state in which one of our insurance company subsidiaries is domiciled. Root Insurance Company and Root Property & Casualty are domiciled in Ohio and subject to a financial condition examination by the Ohio DOI at least every three to five years, during which the Ohio DOI reviews the Company’s financials, governance, and operations, including its relationships and transactions with affiliates. Root Insurance Company’s first financial condition examination by the Ohio DOI covered the period of January 1, 2015 through December 31, 2019 and was completed on July 8, 2021. Root Property & Casualty, which was redomiciled to Ohio in 2023, was initially a Delaware-domiciled insurer, and was subject to a similar financial condition examination by the Delaware DOI, which covered the period of January

1,Periodic 2016 through December 31, 2020 and was completed on February 2, 2022. The Ohio DOI and Delaware DOI examination reports are available to the public and contain no formal findings. Additionally, no financial statement adjustments were required as a result of the Ohio DOI and the Delaware DOI examinations. Currently, Root Insurance Company and Root Property & Casualty are undergoing a financial condition examination led by the Ohio DOI. Examinations

WeOur ~~are~~insurance ~~also~~subsidiaries are subject to ~~market~~on-site ~~conduct~~visits ~~examinations~~and infinancial ~~any~~and/or ~~state~~market inconduct ~~which~~examinations ~~one~~by ofstate ~~our~~ insurance ~~subsidiaries~~regulatory ~~issues policies~~authorities. ~~Market~~We ~~conduct~~are ~~examinations~~subject ~~examine~~to anfinancial ~~insurer’s~~condition ~~conduct toward policyholders, including complaint handling, marketing, claims, policyholder notice, rate and form filing, and customer service. These~~ examinations ~~can result~~ in ~~fines~~any ~~and~~state ~~other~~in ~~monetary~~which ~~penalties,~~one asof ~~well~~our asinsurance ~~other~~company ~~regulatory~~subsidiaries ~~orders~~is ~~requiring remedial, injunctive, or other corrective action~~domiciled. ~~As of December 31, 2023,~~ Root Insurance Company isand ~~undergoing~~Root ~~market~~Property ~~conduct~~& ~~examinations~~Casualty ~~conducted~~are bydomiciled ~~the~~in ~~Maryland~~Ohio ~~Insurance Administration~~ and ~~the~~subject ~~Colorado~~to ~~Division of Insurance, with~~ a ~~market~~financial ~~conduct~~condition examination ~~conducted~~ by the ~~California~~Ohio ~~Department~~DOI ofat ~~Insurance~~least ~~having~~every ~~recently~~three ~~begun~~to infive ~~2024~~years, ~~and~~during awhich ~~market~~the ~~conduct~~Ohio ~~examination~~DOI ~~conducted~~reviews by the ~~Pennsylvania~~Company’s ~~Insurance~~financials, ~~Department~~governance, ~~tentatively~~and ~~scheduled~~operations, toincluding ~~begin~~its inrelationships ~~early~~and ~~2024~~transactions with affiliates. The ~~Virginia~~most ~~Bureau~~recent offinancial ~~Insurance~~condition ~~examination~~examinations of Root ~~concluded~~Insurance inCompany ~~2023,~~ and inRoot ~~addition~~Property to& ~~requiring~~Casualty by the ~~company~~Ohio toDOI ~~undertake~~covered ~~remedial action,~~ the ~~Bureau~~periods ~~fined~~of ~~the~~January ~~company~~1, ~~for~~2020 ~~various~~through ~~market~~December ~~conduct~~31, ~~violations~~2022 ~~for~~and anJanuary ~~immaterial~~1, ~~amount.~~2021 Inthrough ~~addition,~~December ~~Root Re~~31, ~~our Cayman Islands subsidiary~~2022, isrespectively. ~~subject~~The toexamination ~~inspections~~reports bywere ~~the~~completed ~~Cayman~~on ~~Islands~~June ~~Monetary Authority~~14, ~~or CIMA~~2024, ~~on an ad-hoc basis~~ and ~~typically~~are ~~every~~available ~~three~~ to ~~five~~the ~~years~~public. ToThere ~~date~~were no ~~inspection~~formal ~~has~~findings ~~occurred~~or financial statement adjustments.

We are also subject to market conduct examinations in any state in which one of our insurance subsidiaries issues policies. Market conduct examinations examine an insurer’s conduct toward policyholders, including complaint handling, marketing, claims, policyholder notice, rate and form filing, and customer service. These examinations can result in fines and other monetary penalties, as well as other regulatory orders requiring remedial, injunctive, or other corrective action. Previously, we have been subject to such fines, although the amounts have been immaterial. As of December 31, 2024, Root Insurance Company is undergoing market conduct examinations conducted by the Maryland Insurance Administration, the Colorado Division of Insurance, the California Department of Insurance, the Pennsylvania Insurance Department, and the Missouri Department of Insurance. In addition, Root Re, our Cayman Islands subsidiary, is subject to inspections by the Cayman Islands Monetary Authority, or CIMA, on an ad-hoc basis and typically every three to five years. An inspection is scheduled for the first quarter of 2025.

Statutory Accounting Principles

A licensed insurance carrier’s financial statements must be completed in accordance with statutory accounting principles, or SAP. SAP was developed by U.S. insurance regulators as a method of accounting used to monitor and regulate the solvency of insurance companies. In developing SAP, insurance regulators were primarily concerned with evaluating an insurer’s ability to pay all its current and future obligations to customers. As a result, statutory accounting focuses on conservatively valuing the assets and liabilities of insurers, generally in accordance with standards specified by the insurer’s domiciliary jurisdiction.

Uniform statutory accounting practices are established by the NAIC and generally adopted by regulators in the various U.S. jurisdictions. These accounting principles and related regulations differ somewhat from generally accepted accounting principles in the ~~United States~~U.S., or GAAP, which are designed to measure a business on a going-concern basis. GAAP gives consideration to matching of revenue and expenses and, as a result, certain ~~expenses~~costs are capitalized when incurred and then amortized over the life of the associated policies where SAP generally recognizes those costs as expenses when incurred. Other assets such as ~~goodwill~~fixed assets are accounted for under GAAP financial statements, but are not admitted under SAP. As a result, the values for assets, liabilities, and equity reflected in financial statements prepared in accordance with GAAP may be different from those reflected in financial statements prepared under SAP.

Credit for Reinsurance

Our wholly-owned regulated U.S. insurance subsidiaries, primarily Root Insurance Company isand Root Property & Casualty, are currently ~~party~~parties to a number of reinsurance agreements under which itthey ~~has~~have ceded a portion of ~~the~~their risk itthey isare insuring to various reinsurers, including but not limited to Root Re. State insurance laws permit U.S. insurance companies, as ceding insurers, to take financial statement credit for reinsurance that is ceded, so long as the assuming reinsurer satisfies the state’s credit for reinsurance laws. Once an insurance carrier has received credit for reinsurance it does not need to hold separate ~~admitted assets as~~ reserves to cover claims on the risks that it has ceded to the reinsurer. There are several different ways in which the credit for reinsurance laws may be satisfied by an assuming reinsurer, including being licensed in the state, being accredited in the state, or maintaining certain types of qualifying collateral. We ensure that all of ~~Root~~our ~~Insurance~~insurance ~~Company~~subsidiaries’s reinsurers qualify for credit for reinsurance so that ~~Root~~they ~~Insurance~~are ~~Company is~~ able to take full financial statement credit for ~~its~~ reinsurance.

Rate Regulation

Most states require personal property and casualty insurers to file rating plans, policy or coverage forms, and other information with the state’s regulatory authority. In certain cases, such rating plans, policy forms, or both must be approved prior to use.

12We currently have products on file and approved in the following states: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, West Virginia, and Wisconsin.

WeThe ~~currently~~speed ~~have~~with ~~products~~which onan ~~file~~insurer ~~and~~can ~~approved~~change rates in ~~the~~response ~~following~~to ~~states:~~competition ~~Alabama,~~or ~~Arizona,~~increasing ~~Arkansas,~~costs ~~California~~depends, ~~Colorado,~~in ~~Connecticut~~part, ~~Delaware,~~on ~~Florida,~~whether ~~Georgia,~~the ~~Illinois,~~rating ~~Indiana,~~laws ~~Iowa,~~are ~~Kansas,~~(i) ~~Kentucky,~~prior ~~Louisiana~~approval, ~~Maryland,~~(ii) ~~Mississippi,~~file-and-use ~~Missouri,~~or ~~Montana,~~(iii) ~~Nebraska,~~use-and-file ~~Nevada,~~laws. ~~New~~In ~~Mexico,~~states ~~North~~having ~~Dakota,~~prior ~~Ohio,~~approval ~~Oklahoma~~laws, ~~Oregon,~~the ~~Pennsylvania,~~regulator ~~South~~must ~~Carolina,~~approve ~~Tennessee~~a rate before the insurer may use it. In states having file-and-use laws, ~~Texas~~the insurer does not have to wait for the regulator’s approval to use a rate, ~~Utah~~but the rate must be filed with the regulatory authority prior to being used. A use-and-file law requires an insurer to file rates within a certain period of time after the insurer begins using them. Under all three types of rating laws, ~~Virginia~~the regulator has the authority to disapprove a rate filing. In addition, ~~West~~when ~~Virginia~~a regulator disapproves a rate filing that the company has already implemented, ~~and~~the ~~Wisconsin~~regulator may require the company to issue refunds to insureds who purchased or renewed a product sold pursuant to that rate filing.

~~The~~An ~~speed~~insurer’s ~~with~~ability ~~which~~to anadjust ~~insurer~~its ~~can change~~ rates in response to competition or ~~increasing~~to changing costs depends, inon ~~part,~~an oninsurer’s ~~whether~~ability to demonstrate to the ~~rating~~regulator ~~laws~~that ~~are~~its ~~(i)~~rates ~~prior~~or ~~approval,~~proposed ~~(ii)~~rating ~~file-and-use~~plan ormeet ~~(iii)~~the ~~use-and-file~~requirements of the rating laws. In those states ~~having~~that ~~prior~~significantly ~~approval~~restrict ~~laws,~~an insurer’s discretion in selecting the ~~regulator~~business ~~must~~that ~~approve~~it awants ~~rate~~to ~~before~~underwrite, ~~the~~an insurer ~~may~~can ~~use~~manage ~~it.~~its Inrisk ~~states~~of ~~having~~loss ~~file-~~by charging a rate to reflect the cost and~~-use~~ ~~laws,~~expense of providing the ~~insurer~~insurance. ~~does~~In ~~not~~those ~~have~~states tothat ~~wait~~significantly ~~for~~restrict ~~the~~an ~~regulator~~insurer’s ~~approval~~ability to ~~use~~charge a rate, ~~but~~that reflects the ~~rate~~cost ~~must~~and beexpense ~~filed~~of ~~with~~providing the ~~regulatory~~insurance, ~~authority~~the ~~prior~~insurer tocan ~~being~~manage ~~used.~~its Arisk ~~use-and-file~~of ~~law~~loss ~~requires~~by anbeing ~~insurer~~more toselective ~~file~~in ~~rates~~the ~~within~~type ~~a certain period~~ of ~~time~~business ~~after~~it ~~the~~underwrites. ~~insurer~~When ~~begins~~a ~~using~~state ~~them.~~significantly ~~Under~~restricts ~~all~~both ~~three~~underwriting ~~types~~and ofpricing, ~~rating~~it ~~laws,~~becomes ~~the~~more ~~regulator~~difficult ~~has~~for ~~the~~an ~~authority~~insurer to ~~disapprove~~maintain aits ~~rate filing~~profitability.

AnFrom ~~insurer’s~~time ~~ability~~ to ~~adjust~~time, ~~its~~the ~~rates~~personal inlines ~~response~~insurance toindustry ~~competition~~comes orunder topressure ~~changing~~from ~~costs~~state ~~depends~~regulators, onlegislators, anand ~~insurer’s~~special-interest ~~ability~~groups to ~~demonstrate~~reduce, tofreeze, ~~the~~or ~~regulator~~set ~~that~~rates ~~its~~at ~~rates~~levels orthat ~~proposed~~do ~~rating~~not ~~plan~~correspond ~~meet~~with ~~the~~our ~~requirements~~analysis of ~~the~~underlying ~~rating~~costs ~~laws~~and expenses. In ~~those~~recent ~~states~~years, ~~that~~auto ~~significantly~~insurers ~~restrict~~in anparticular ~~insurer’s~~have ~~discretion~~come inunder ~~selecting~~increasing ~~the~~pressure ~~business~~because ~~that~~of itinflation ~~wants~~and other macroeconomic factors. Whether this pressure continues to ~~underwrite,~~exist andepends ~~insurer~~on ~~can~~the ~~manage~~macroeconomic ~~its~~environment. ~~risk~~State ofregulators ~~loss~~may byinterpret ~~charging~~existing alaw ~~rate~~or ~~that~~rely ~~reflects~~on ~~the~~future ~~cost~~legislation ~~and~~or ~~expense~~regulations ofto ~~providing~~impose ~~the~~new ~~insurance~~restrictions that adversely affect profitability or growth. In ~~those~~addition, ~~states~~certain regulators may institute moratoriums that ~~significantly~~prohibit ~~restrict~~or limit an insurer’s ability to ~~charge~~cancel aor ~~rate~~non-renew ~~that~~an ~~reflects~~insurance ~~the~~policy ~~cost~~or ~~and~~require ~~expense~~an ofinsurer ~~providing~~to defer the ~~insurance,~~collection ~~the~~of ~~insurer~~past-due ~~can~~premiums ~~manage~~to ~~its~~the ~~risk~~end of ~~loss~~the bymoratorium ~~being~~period. ~~more~~These ~~selective~~moratoriums may lead to an increase in ~~the~~earned, ~~type~~but ofnot ~~business~~collected itpremium, ~~underwrites~~thereby adversely impacting the insurer. ~~When~~We acannot ~~state~~predict ~~significantly~~with ~~restricts~~precision ~~both~~the ~~underwriting~~impact ~~and~~on ~~pricing,~~our itbusiness ~~becomes~~of ~~more~~possible ~~difficult~~future ~~for~~legislative anand ~~insurer~~regulatory tomeasures ~~maintain~~regarding ~~its~~insurance ~~profitability~~rates.

From time to time, the personal lines insurance industry comes under pressure from state regulators, legislators, and special-interest groups to reduce, freeze, or set rates at levels that do not correspond with our analysis of underlying costs and expenses. In particular, auto insurers have come under increasing pressure because of inflation and other macroeconomic factors. Whether this pressure continues to exist depends on the macroeconomic environment. State regulators may interpret existing law or rely on future legislation or regulations to impose new restrictions that adversely affect profitability or growth. We cannot predict with precision the impact on our business of possible future legislative and regulatory measures regarding insurance rates.

Insolvency Funds and Associations, Guarantee Funds, Assigned Risk Plans, Mandatory Pools, and Insurance Facilities

Most states require admitted property and casualty insurance companies to become members of insolvency funds or associations, which they fund through an annual assessment. In addition, certain states have enacted laws that require an insurer conducting business in that state to participate in assigned risk plans, reinsurance facilities and joint underwriting associations. These funds cover payments of claims of state policyholders whose admitted insurance carriers have become insolvent. The annual assessments required in any one year will vary from state to state and are subject to various maximum assessments per line of insurance.

Investment Regulation

Root Insurance Company and Root Property & Casualty are subject to Ohio’s rules and regulations governing the investment of its assets, while Root Florida is subject to Florida’s rules and regulations. These laws generally require that an insurance company invest in a diverse portfolio and limit their investments in certain asset categories. Failure to comply with these laws and regulations would cause non-conforming investments to be treated as non-admitted assets for purposes of measuring statutory surplus and, in certain circumstances, we would be required to dispose of those investments.

Trade Practices

Insurance producers are subject to regulation on how they may sell, solicit or negotiate insurance and conduct their business, with state laws prohibiting certain unfair trade practices. Such practices include, but are not limited to, false advertising, making false statements to regulators, unfair discrimination and rebating premium to policyholders above certain de minimis amounts. We set business conduct policies and provide training to make our employee-agents and other customer service personnel aware of these prohibitions and require them to conduct their activities in compliance with these statutes.

Unfair Claims Practices

Insurance companies, third-party administrators and individual claims adjusters are ~~generally~~ prohibited by state statutes from engaging in unfair claims practices. Unfair claims practices include, but are not limited to, misrepresenting pertinent facts or insurance policy provisions, failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies, failing to adopt reasonable standards for the investigation and ~~settlement~~adjustment of a claim and attempting to settle a claim for less than the amount to which a reasonable person would have believed such person was entitled. We set business conduct policies to make claims adjusters aware of these prohibitions and to require them to conduct their activities in compliance with these statutes.

Commission Sharing

Insurance producers cannot share insurance commissions with any person for selling, soliciting or negotiating insurance unless such person holds an insurance producer license in the lines of insurance that are being transacted. Under the insurance laws of most states, there is a limited exception to this prohibition on commission sharing for the payment of referral fees to unlicensed persons, provided that the fee is a flat fee that is not contingent on the purchase of insurance and the referral does not involve the discussion of the terms or conditions of the policy. We set business conduct policies to make appropriate employees aware of these rules and the policies require them to conduct their activities in compliance with these statutes.

Data Privacy and Cybersecurity

The use of non-public personal information in the insurance industry is subject to regulation under the privacy provisions of the Gramm-Leach Bliley Act and the NAIC Insurance Information and Privacy Act, as adopted and implemented by the various state legislatures and insurance regulators, including through the California Financial Information Privacy Act. Pursuant to these laws and regulations, among other things, an insurance carrier or producer must disclose its privacy policies to all of its applicants and policyholders and must also provide either an opt-in or opt-out, depending on the state, to the sharing of non-public personal information with unaffiliated third parties. Under these rules and regulations, insurance companies and producers must also establish a program of administrative, technical, and physical safeguards designed to address the security and confidentiality of customer information, protect against anticipated threats or hazards to the security or integrity of customer information, and protect against unauthorized access to or use of customer information that could result in substantial harm or inconvenience to the customers.

Certain collection and processing of personal information makes us subject to the California Consumer Privacy Act, or CCPA, which took effect on January 1, 2020, and the California Privacy Rights Act, or CPRA, which took effect on January 1, 2023. The CCPA and CPRA give California residents the right to access and require deletion of certain of their personal information, opt out of certain personal information sharing, and receive detailed disclosures about how their personal information is used and shared. The CCPA and CPRA exempt certain information that is collected, processed, sold or disclosed pursuant to the California Financial Information Privacy Act, the Gramm-Leach-Bliley Act or the federal Driver’s Privacy Protection Act, which also apply to us. However, the definition of “personal information” in the CCPA is broad and encompasses other information that we process beyond the scope of this exemption.

In addition, we are subject to multiple state requirements pertaining to how insurers handle their customers’ non-public personal information. For example, similar to California, Virginia provides that their residents have, with respect to certain of their personal data, the right to access their personal data, request corrections or deletions, or make amendments. Virginia law further requires us to notify their residents, which we do through our privacy policy, that personal information may be obtained from persons other than the individual customer, and that this information, as well as other personal information, may be disclosed to third parties without their consent. Moreover, we must notify these individuals that their financial information may be disclosed to affiliates and non-affiliates as permitted by law. We also, in a similar manner, provide residents of Montana notice that their state allows its residents to request a record of any disclosures of their medical information during the preceding three years and notice of information collected by our websites, including social media pages we control and through applications and software applications Root makes available for customers’ use. In addition to these states, Nevada provides its residents with the right to request a website operator not to sell their information.

~~Further,~~disclosures inabout ~~response~~how totheir ~~the~~personal ~~growing~~information ~~threat~~is ofused ~~cyber-attacks~~and inshared. ~~the~~The ~~insurance~~CCPA ~~industry,~~and ~~several~~CPRA ~~jurisdictions~~exempt ~~have~~certain ~~adopted,~~information orthat ~~have~~is ~~begun~~collected, ~~to consider adopting~~processed, ~~cybersecurity~~sold ~~regulations~~or ~~that~~disclosed ~~establish~~pursuant ~~requirements~~to ~~and standards for safeguarding non-public personal information, including~~ the ~~New~~California ~~York Department of~~ Financial ~~Services.~~Information InPrivacy ~~2017~~Act, the ~~NAIC~~Gramm-Leach-Bliley ~~adopted~~Act or the ~~Insurance~~federal ~~Data~~Driver’s ~~Security~~Privacy ~~Model~~Protection ~~Law~~Act, ~~intended~~which toalso ~~serve~~apply ~~as model legislation for states~~ to ~~enact~~us. inHowever, ~~order to govern~~ the ~~cybersecurity~~definition ~~and~~of ~~data~~“personal ~~protection~~information” ~~practices~~in ofthe ~~insurers,~~CCPA ~~insurance~~is ~~agents,~~broad and encompasses other ~~licensed~~information ~~entities~~that ~~registered~~we ~~under~~process ~~state~~beyond ~~insurance~~the ~~laws.~~scope ~~A number~~ of ~~states~~this ~~have~~exemption. ~~adopted~~In ~~versions of the Insurance Data Security Model Law~~addition, ~~each~~we ~~with~~are asubject ~~different~~to ~~effective~~multiple ~~date. Additional~~ state ~~laws impose notification~~ requirements inpertaining ~~the~~to ~~event~~how ofinsurers ~~cybersecurity~~handle ~~breaches affecting~~ their ~~residents.~~customers’ ~~Root~~non-public ~~takes~~personal ~~steps to comply with applicable cybersecurity regulations~~information, including but ~~the~~not ~~patchwork~~limited ~~nature~~to ~~of the laws~~ in ~~this~~Virginia, ~~area~~Montana, ~~currently can make it more costly~~ and ~~difficult to ensure compliance~~Nevada.

Further, in response to the growing threat of cybersecurity-attacks in the insurance industry, several jurisdictions have adopted, or have begun to consider adopting, cybersecurity regulations that establish requirements and standards for safeguarding non-public personal information, including the New York Department of Financial Services. In 2017, the NAIC adopted the Insurance Data Security Model Law, intended to serve as model legislation for states to enact in order to govern the cybersecurity and data protection practices of insurers, insurance agents, and other licensed entities registered under state insurance laws. A number of states have adopted versions of the Insurance Data Security Model Law, each with a different effective date. Additional state laws impose notification requirements in the event of cybersecurity breaches affecting their residents. Root takes steps to comply with applicable cybersecurity regulations, but the patchwork nature of the laws in this area currently makes it more costly and difficult to ensure compliance.

Federal Regulation

The regulation of insurance companies is principally a matter of state law, and the federal government does not directly regulate the transaction of insurance. However, federal regulation and initiatives do have an impact on the insurance industry. In particular, the Federal Insurance Office, or FIO, was established within the U.S. Department of the Treasury by the Dodd-Frank Act in July 2010 to monitor and coordinate the regulation of the insurance industry across the ~~United States~~U.S.

Although the FIO has limited direct regulatory authority over insurance companies or other insurance industry participants, it does represent the ~~United~~U.S. ~~States~~ on prudential aspects of international insurance matters, including at the International Association of Insurance Supervisors, or IAIS. In addition, the FIO serves as an advisory member of the Financial Stability Oversight Council, or FSOC, assists the Secretary of the U.S. Department of the Treasury with administration of the Terrorism Risk Insurance Program, monitors trends in the insurance industry and advises the secretary of the U.S. Department of the Treasury on important national and international insurance matters. The FIO has the ability to make a recommendation to the FSOC to designate an insurer as “systemically significant,” subjecting the insurer to regulation by the Federal Reserve as a bank holding company, which in some cases could lead to higher capital requirements.

In addition, a number of federal laws affect and apply to the insurance industry, including various privacy laws, false advertising laws, anti-money laundering laws, the Fair Credit Reporting Act, or FCRA, and the economic and trade sanctions implemented by the Office of Foreign Assets Control, or OFAC. We acquire consumer reports, including credit reports and driving data about applicants with their consent, which are governed by the FCRA. OFAC has in the past imposed civil penalties on persons, including insurance and reinsurance companies, arising from violations of its economic sanctions program.

Available Information

General information about Root, Inc., including our Corporate Governance Guidelines and our Code of Business Conduct and Ethics, can be found at ir.joinroot.com under the “Governance” tab by selecting “Documents & Charters.” We will post on our website any amendments to, or waivers from, our Code of Business Conduct and Ethics requiring disclosure under applicable rules within four business days of the amendment or waiver. Charters for the Audit, Risk and Finance Committee, Compensation Committee, and Nominating and Governance Committee are also available at this location. Root, Inc. uses its website, ir.joinroot.com, as a channel for routine distribution of important information, including news releases and other investor communications. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as any amendments and exhibits to those reports, are available free of charge through our website as soon as reasonably practicable after the reports are filed with or furnished to the SEC. These documents are also available in hard copy, free of charge, by contacting our Investor Relations office. Additionally, the SEC maintains a website (www.sec.gov) that contains the reports, proxy statements and information statements, and other information regarding issuers that file or furnish electronically with the SEC. In addition, our website allows investors and other interested persons to sign up to automatically receive email alerts when we post news releases and financial information on our website. Information contained on our website is not incorporated into this Annual Report on Form 10-K or other securities filings.

filed with or furnished to the SEC. These documents are also available in hard copy, free of charge, by contacting our Investor Relations office. Additionally, the SEC maintains a website (www.sec.gov) that contains the reports, proxy statements and information statements, and other information regarding issuers that file or furnish electronically with the SEC. In addition, our website allows investors and other interested persons to sign up to automatically receive email alerts when we post news releases and financial information on our website. Information contained on our website is not incorporated into this Annual Report on Form 10-K or other securities filings.

Item 1A. Risk Factors

The following are certain risk factors that could affect our business, ~~financial position and~~ results of operations, financial condition and prospects. Although the risks are organized by headings and each risk is described separately, many of the risks are interrelated. The risks that we have highlighted in the following section of this report are not the only ones that we face. Our business involves various risks and uncertainties as well as those associated with the general business and insurance industry environments.

Investing in our Class A common stock involves a high degree of risk. You should carefully consider the following risks, together with all of the other information contained in this Annual Report on Form 10-K, before deciding to invest in our Class A common stock. Our business, ~~financial condition,~~ results of operations, financial condition or prospects could be materially and adversely affected by any of these risks or uncertainties, as well as by risks or uncertainties not currently known to us, or that we do not currently believe are material. In that case, the trading price of our Class A common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business

We have a history of net losses and could ~~continue to~~ incur substantial net losses in the future. We may not be able to grow or achieve or maintain profitability in the future.

We ~~have~~ incurred net losses on an annual basis ~~since~~from our incorporation in 2015 through the second quarter of 2024, and we may incur significant net losses in the future. We incurred net losses of $147.4 million, and $297.7 million ~~and $521.1 million~~ for the years ended December 31, 2023, ~~2022~~ and ~~2021~~2022, respectively. WeWhile we recorded a net profit of $30.9 million for 2024, we had an accumulated loss of $1,~~715~~681.29 million and $1,~~567~~715.82 million as of December 31, ~~2023~~2024 and December 31, ~~2022~~2023, respectively.

The principal driver of our historical losses tohas ~~date~~been is our loss ratios associated with accidents by our customers. As a newer and historically high growth-focused full-stack insurance company, we have a higher proportion of new customers and/or customers who are inclined to more regularly shop for insurance relative to longer-tenured insurance companies. This higher proportion of new and shopper customers typically generates proportionately greater losses, thus impacting our loss ratio. Like with other more-tenured insurance companies, over time we expect a greater proportion of all customers will be renewal customers. Establishing adequate premium rates is necessary, together with investment income, if any, to generate sufficient revenue to offset losses, loss adjustment expenses, or LAE, and other costs. When we do not accurately assess the risks that we underwrite, the premiums that we charge may not be adequate to cover our losses and expenses, which adversely affects our results of operations and our profitability.

WeDespite ~~expect~~posting ~~accumulated~~a net ~~loss~~profit tofor ~~continue~~2024, toour accumulated net loss may increase as we continue to make investments in the development and expansion of our business or if we suffer adverse business results. Expenses in the areas of building ~~embedded~~partnership products, telematics, digital marketing, brand advertising, consumer-facing technologies, core insurance operations services and lines of insurance not presently offered by Root contribute to net losses. We have in the past encountered, and ~~may~~will continue to encounter, unforeseen or unpredictable factors, including, but not limited to, elevated operating expenses, complications or delays, or other losses (for example, litigation losses), which have and may in the future result in increased costs, contributing to our net losses and impacting our ability to grow. It is difficult to predict the size and growth rate of our market, demand for our services and success of current or potential future competitors and our investments to grow our business may not result in increased or sufficient revenue or growth for several years or at all. Additionally, we will continue to incur significant expenses in connection with the repayment of the outstanding principal and accrued interest on our ~~term~~Amended ~~loan~~Term Loan (as defined herein), and we will also incur significant legal, accounting and other expenses as a public company.

Our limited operating history makes it difficult to evaluate our current business and our future prospects. While our revenue has grown in some recent periods and contracted in others, our historic growth rate may not be sustainable. With changes to our focus areas of growth, our historic growth rates should not be considered indicative of future performance, and we may not realize sufficient revenue to ~~achieve or~~ maintain profitability. Revenue growth rates may slow in future periods due to a number of reasons. Weincluding ~~may choose to preserve capital, change our focus areas of growth, or encounter unforeseen or unpredictable factors, which may result in~~ increased ~~operating expenses, other losses, complications or delays slowing demand for our service, increasing~~ competition, aand ~~decrease in the growth of our overall~~ market, ~~and~~changes. ~~our~~We ~~failure to capitalize on growth opportunities or the maturation of our~~

business. If we fail to manage our losses or to grow our revenue sufficiently to keep pace with our investments and other expenses, our business will be seriously harmed and we may not achieve or maintain profitability in future periods.

We may lose existing customers or fail to acquire new customers, including through our partnership channel, and our future growth and profitability depend in part on our ability to successfully operate in an insurance industry that is highly competitive. If we are unable to maintain the levels of customer service or continue technological innovation and improvements, our prospects for future growth may be materially adversely affected.

If we lose customers, our value will diminish. In addition, we may fail to accurately predict risk segmentation of new customers or potential customers, which could also reduce our profitability. While our loss performance has generally improved over time, loss performance is influenced by a number of factors, including inflation, and as more customers renew their policies and remain policyholders for longer, a future loss of customers could lead to higher loss ratios or loss ratios that cease to decline, which would adversely impact our profitability. Further, our ability to attract and retain customers depends, in part, on our ability to successfully expand geographically, grow our business in the markets we currently serve, expand into new lines of business and offer additional products beyond automobile, renters and homeowners insurance. Expanding into new geographic markets takes time, places us in unfamiliar competitive environments, requires us to navigate and comply with extensive regulations and may occur more slowly than we expect or than it has occurred in the past.

Further, the insurance industry in which we operate is highly competitive. Many of our primary competitors have well-established national brands and market similar products. Our competitors include large national insurance companies, as well as up-and-coming companies and new market entrants in the insurtech industry, some of which also utilize telematics and offer forms of usage-based insurance. Several of these established national insurance companies are larger than us and have significant competitive advantages over us, including better name recognition, higher financial ratings, greater resources, additional access to capital, and more types of insurance coverage to offer, such as health and life. In particular, many of our competitors offer consumers the ability to purchase multiple types of insurance coverage and “bundle” them together into one policy and, in certain circumstances, include an umbrella liability policy for additional coverage at competitive prices. As we expand into new lines of business and offer additional products, we could face intense competition from traditional insurance companies that are already established in such markets.

Our business model and technology are still nascent compared to the established business models of the well-established incumbents in the insurance market. Our success in the automobile insurance market depends on our deep understanding of this industry. To penetrate new vertical markets, we will need to develop a deep understanding of those new markets and the associated business challenges faced by participants in them. Developing this level of understanding may require substantial investments of time and resources, and we may not be successful. In addition to the need for substantial resources, insurance regulation could limit our ability to introduce new product offerings. New insurance products could take an extended amount of time to be approved by regulatory authorities or may not be approved at all. If we fail to penetrate new vertical markets successfully, our revenue may grow at a slower rate than we anticipate, and our business, results of operations and financial condition could be materially adversely affected.

We have invested in growth strategies by utilizing unique customer value propositions, differentiated product offerings and distinctive advertising campaigns. In addition, we have invested in and are actively attempting to expand our partnership channel, including our embedded insurance offering. If we are unsuccessful through these strategies in generating new business, retaining a sufficient number of customers or retaining or acquiring key relationships, our ability to maintain or increase premiums written or the ability to sell our products could be adversely impacted. Because of the competitive nature of the insurance industry, there can be no assurance that we will continue to compete effectively within our industry, or that competitive pressures will not have a material effect on our business, results of operations or financial condition. If we fail to remain competitive on customer experience, pricing, and insurance coverage options, our ability to grow our business may also be adversely affected.

may choose to preserve capital, change our focus areas of growth, reinvest in the business, or encounter unforeseen or unpredictable factors, which may, and in some cases will, result in increased operating expenses, other losses, complications or delays slowing demand for our services, increasing competition, a decrease in the growth of our overall market, and our failure to capitalize on growth opportunities or the maturation of our business. If we fail to manage our losses or to grow our revenue sufficiently to keep pace with our investments and other expenses, our business will be seriously harmed and we may not maintain profitability in future periods.

If we lose customers, our value will diminish. In addition, we may fail to accurately predict risk segmentation of new customers or potential customers, which could also reduce our profitability. While our loss performance has generally improved over time, loss performance is influenced by a number of factors, including inflation, and as more customers renew their policies and remain policyholders for longer, a future loss of customers could lead to higher loss ratios or loss ratios that cease to decline, which would adversely impact our profitability. Further, our ability to attract and retain customers depends, in part, on our ability to successfully expand geographically, grow our business in the markets we currently serve, expand into new lines of business and offer additional products beyond automobile and renters insurance. Expanding into new geographic markets takes time, places us in unfamiliar competitive and regulatory environments, requires us to navigate and comply with extensive regulations and may occur more slowly than we expect and we may be unsuccessful at expanding nationwide.

Further, the insurance industry in which we operate is highly competitive. Many of our primary competitors have well-established national brands and market similar products. Our competitors include large national insurance companies, as well as up-and-coming companies and new market entrants in the insurtech industry, some of which also utilize telematics and offer forms of usage-based insurance. Several of these established national insurance companies are larger than us and have significant competitive advantages over us, including better name recognition, higher financial ratings, greater resources, additional access to capital, and more types of insurance coverage to offer, such as health and life. In particular, many of our competitors offer consumers the ability to purchase multiple types of insurance coverage and “bundle” them together for discounts under one policy and, in certain circumstances, include an umbrella liability policy for additional coverage at competitive prices. To the extent we expand into new lines of business and offer additional products, we will face intense competition from traditional insurance companies that are already established in such markets.

Our business model and technology are still developing compared to the established business models of the well-established incumbents in the insurance market. Our success in the automobile insurance market depends on our deep understanding of this industry. To penetrate new vertical markets, we will need to develop a deep understanding of those new markets and the associated business challenges faced by participants in them. Developing this level of understanding requires substantial investments of time and resources, and we may not be successful. In addition to the need for substantial resources, insurance regulation could limit our ability to introduce new product offerings. New insurance products could take an extended amount of time to be approved by regulatory authorities or may not be approved at all. If we fail to penetrate new vertical markets successfully, our revenue may grow at a slower rate, and our business, results of operations, financial condition and prospects could be materially adversely affected.

We have invested in growth strategies by utilizing unique customer value propositions, differentiated product offerings and distinctive advertising campaigns. In addition, we have invested in and are actively attempting to expand our partnership channel, including our embedded insurance offering and our independent agent platform. If we are unsuccessful through these strategies in generating new business, retaining a sufficient number of customers or retaining or acquiring key relationships, our ability to maintain or increase premiums written or the ability to sell our products will be adversely impacted. Because of the competitive nature of the insurance industry, there can be no assurance that we will continue to compete effectively within our industry, or that competitive pressures will not have a material effect on our business, results of operations, financial condition and prospects. If we fail to remain

competitive on customer experience, pricing, and insurance coverage options, our ability to grow our business will also be adversely affected.

There are many other factors that could negatively affect our ability to maintain or grow our customer base, including if:

•we fail to offer new and competitive products, or fail to maintain or obtain regulatory approvals necessary for expansion into new markets or in relation to our products (such as underwriting and rating requirements);

•we fail to realize profits, retain customers, contract with additional partners to utilize products, or achieve other benefits related to our ~~partnerships~~partnership channel, including our embedded insurance offering and our independent agent platform;

•we fail to effectively use search engines, social media platforms, digital app stores, content-based online advertising, and other online sources for generating traffic to our website and our mobile app;

•our digital platform experiences disruptions; technical or other problems frustrate the customer experience, particularly if those problems prevent us from generating quotes or paying claims in a fast and reliable manner; we fail to provide effective updates to our existing products or to keep pace with technological improvements in our industry; or customers have difficulty installing, updating or otherwise accessing our app or website on mobile devices or web browsers as a result of actions by us or third parties;

•we suffer reputational harm to our brand including from negative publicity, whether accurate or inaccurate;

•customers are unable or unwilling to adopt or embrace new technology or the perception emerges that purchasing insurance products online is not as effective as purchasing those products through traditional offline methods; or

•we experience cybersecurity ~~events~~incidents or are unable to address customer concerns regarding the content, privacy, and security of our digital platform and our customers’ information.

Our inability to overcome these challenges ~~could~~will impair our ability to attract new customers and retain existing customers and could have a material adverse effect on our business, operating results and financial condition.

We may require additional capital to support business growth or to satisfy our regulatory capital and surplus requirements, and this capital might not be available on acceptable terms, if at all.

We intend to continue to make investments to support our business growth ~~and~~which ~~may~~will require ~~additional~~us to use funds to respond to business challenges, including the need to develop new features and products or enhance our existing products and services, satisfy our regulatory capital and surplus requirements, cover losses, improve our operating infrastructure or acquire complementary businesses and technologies. Many factors will affect our capital needs as well as their amount and timing, including our growth and profitability, regulatory requirements, market disruptions and other developments. If our present capital and surplus is insufficient to meet our current or future operating requirements, including regulatory capital and surplus requirements, or to cover losses, we may need to raise additional funds through financings or curtail our growth. We evaluate financing opportunities from time to time, and our ability to obtain financing will depend, among other things, on our development efforts, business plans and operating performance, as well as the condition of the capital markets at the time we seek financing. We cannot be certain that additional financing will be available to us on favorable terms, or at all.

If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of Class A common stock. Further, if the trading price of our Class A common stock ~~remains~~is depressed or declines ~~further~~, the potential magnitude of this dilution will increase. As an insurance company, we are subject to extensive laws and regulations in every jurisdiction in which we conduct business, and any such issuances of equity or convertible debt securities to secure additional funds may be impeded by regulatory approvals or requirements imposed by such regulatory authorities if such issuances are deemed to result in a person acquiring “control” of our company under applicable insurance laws and regulations. Such regulatory requirements may require potential investors to disclose their organizational structure and detailed

financial statements as well as require managing partners, directors and/or senior officers to submit biographical affidavits which may deter investment in our company.

Further, we are restricted by covenants in our Term Loan (as defined herein). These covenants restrict, among other things, our ability to incur additional debt without lender consent or grant liens over our assets, which may limit our ability to obtain additional funds.

We rely on telematics, mobile technology and our digital platform to collect data points that we evaluate in pricing and underwriting our insurance policies, managing claims and customer support, and improving business processes. To the extent regulators prohibit or restrict our collection or use of this data, our business could be harmed.

We use telematics, mobile technology and our digital platform to collect data points that we evaluate in pricing and underwriting certain of our insurance policies, managing claims and customer support, and improving business processes. Our business model is dependent on our ability to collect or use driving behavior data and utilize telematics. If legislation were to restrict our ability to collect driving behavior data, it could impair our capacity to underwrite insurance cost effectively, negatively impacting our revenue and earnings. In addition, if federal, state or international regulators were to determine that the type of data we collect, the process we use for collecting this data or how we use it unfairly discriminates against a protected class of people, regulators could move to prohibit or restrict our collection or use of this data.

Due to Proposition 103 in California, we are currently limited in our ability to use telematics data beyond miles-driven to underwrite insurance, including data on how the car is driven. This has significantly hindered our ability to offer cost-competitive insurance policies in California and could impede our ability to offer insurance policies in other states if they were to pass similar laws or regulations.

Although there is currently limited federal and state legislation outside of California restricting our ability to collect driving behavior data, private organizations are implementing principles and guidelines to protect driver privacy. The Alliance of Automobile Manufacturers and Global Automakers established their Consumer Privacy Protection Principles to provide member automobile manufacturers with a framework with which to consider privacy and build privacy into their products and services while the National Automobile Dealers Association has partnered with the Future of Privacy Forum to produce consumer education guidelines that explain the kinds of information that may be collected by consumers’ cars, the guidelines that governs how it is collected and used, and the options consumers may have to protect their vehicle data. The Global Alliance for Vehicle Data Access is another organization that was formed to advocate for driver ownership of all vehicle data, particularly for insurance underwriting purposes. If federal or state legislators pass laws limiting our ability to collect driver data, particularly through driver’s smartphones, such legislation could have a material adverse effect on our business, financial condition or results of operations.

Some regulators have expressed interest in the use of external data sources, algorithms and/or predictive models in insurance underwriting or rating. Specifically, regulators have raised questions about the potential for unfair discrimination and lack of transparency associated with the use of external consumer data. A determination by federal or state regulators that the data points we collect and the process we use for collecting data unfairly discriminates against a protected class of people could subject us to fines and other sanctions, including, but not limited to, disciplinary action, revocation and suspension of licenses, regulatory fines and other sanctions, and withdrawal of product forms. Any such event could, in turn, materially and adversely affect our business, financial condition, results of operations and prospects. Although we have implemented policies and procedures into our business operations that we feel are appropriately calibrated to our machine learning and automation-driven operations, these policies and procedures may prove inadequate to manage our use of this nascent technology, resulting in a greater likelihood of inadvertent legal or compliance failures.

Regulators may also require us to disclose the external data we use, algorithms and/or predictive models prior to approving our underwriting models and rates. Such disclosures could put our intellectual property at risk.

Additionally, existing laws, future laws, and evolving attitudes about privacy protection may impair our ability to collect, use, and maintain data points of sufficient type or quantity to develop and train our algorithms. If such

acquiring “control” of our company under applicable insurance laws orand regulations. ~~were~~Such ~~enacted~~regulatory ~~federally~~requirements ormay inrequire apotential ~~large~~investors ~~number~~to ofdisclose ~~states~~their inorganizational ~~which~~structure weand ~~operate,~~detailed itfinancial ~~could~~statements ~~impact~~as ~~the~~well ~~integrity~~as require managing partners, directors and/or ~~quality~~senior ofofficers ~~our~~to ~~pricing~~submit ~~and~~biographical ~~underwriting~~affidavits ~~processes~~which may deter investment in our company.

WeFurther, ~~may~~we ~~fail~~are torestricted ~~maintain~~by ancovenants ~~effective~~in ~~partnership~~our ~~channel~~Amended ~~offering~~Term Loan. These covenants restrict, ~~including~~among other things, our ~~embedded~~ability ~~insurance~~to ~~product~~incur ~~and/~~additional debt without lender consent or ~~fail~~grant toliens ~~perform~~over ~~under~~our ~~the~~assets, ~~associated~~which ~~commercial~~may ~~arrangements~~limit our ability to obtain additional funds.

We ~~entered~~rely ~~into a commercial agreement with Carvana~~ on ~~October 1~~telematics, ~~2021,~~mobile intechnology ~~which~~and ~~the~~our ~~parties~~digital ~~agreed~~platform to ~~develop~~collect andata ~~integrated~~points ~~automobile~~that ~~insurance~~we ~~solution~~evaluate ~~for~~in ~~Carvana’s~~pricing ~~online car buying platform,~~ and weunderwriting ~~pay~~our ~~commissions to Carvana for~~ insurance policies, ~~purchased~~managing byclaims ~~Carvana customers. The commercial agreement includes exclusivity rights to offer automobile insurance on Carvana’s platform,~~ and wecustomer ~~will partner exclusively with Carvana for an enterprise total loss replacement vehicle solution. In addition~~support, ~~we are a party to~~ and ~~are~~improving ~~pursuing~~business ~~commercial arrangements with other potential partners with varying levels of integration, including utilization of an embedded insurance offering~~processes. IfTo wethe orextent ~~our~~regulators ~~commercial~~prohibit counterparties, including Carvana, are unable to satisfy obligations under commercial arrangements, if we are unable to maintain effective partnership arrangements, including an embedded insurance product, if we are unable to contract with additional partners to utilize these products, or ifrestrict our ~~partners~~collection ~~experience difficulty with their businesses~~ or ifuse ~~they~~of orthis ~~we are unable to attract insurance customers~~data, ~~that could have a material and adverse effect on~~ our business, ~~financial~~will ~~condition~~be ~~and results of operations~~harmed.

We ~~depend~~use ~~on search engines~~telematics, ~~social~~mobile ~~media~~technology ~~platforms,~~and our digital ~~app~~platform ~~stores,~~to ~~content-based~~collect ~~online~~data ~~advertising~~points ~~and~~that ~~other~~we ~~online~~evaluate ~~sources~~in topricing ~~attract~~and ~~consumers~~underwriting tocertain of our ~~website~~insurance policies, managing claims and customer support, and improving business processes. Our business model is dependent on our ~~mobile~~ability ~~app~~to ~~both~~collect, ~~rapidly~~obtain or use driving behavior data and ~~cost-effectively~~utilize telematics. If ~~these~~legislation ~~third~~or ~~parties~~judicial ~~change~~or ~~their~~regulatory ~~listings~~intervention were to restrict our ability to collect or ~~increase~~use ~~their~~driving ~~pricing~~behavior data, ifit would impair our ~~relationships~~capacity ~~with~~to ~~them~~underwrite ~~deteriorate~~insurance orcost ~~terminate~~effectively, ornegatively impacting our revenue and earnings. Further, if ~~other~~federal, ~~factors~~state ~~related~~or international regulators were to ~~these~~determine ~~third~~that ~~parties~~the ~~arise~~type ~~which~~of ~~are~~data ~~beyond~~we ~~our~~collect ~~control~~or obtain, the process we ~~may~~use befor ~~unable~~collecting toor ~~attract~~obtaining ~~new~~this ~~customers~~data ~~rapidly~~or ~~and~~how ~~cost-effectively,~~we ~~which~~use ~~would~~this ~~adversely~~data ~~affect~~is unfairly discriminatory or otherwise violates one or more laws, our ~~business~~ability to collect, obtain and ~~results~~use ofthis ~~operations~~data will be seriously impaired.

~~Our~~Due ~~success~~to ~~depends~~Proposition on103 ~~our~~in ~~ability~~California, towe ~~attract~~are ~~consumers~~currently tolimited in our ~~website~~ability ~~and~~to ~~convert~~use ~~them~~telematics ~~into~~data ~~customers~~beyond inmiles-driven ato ~~rapid~~underwrite ~~and~~insurance, ~~cost-effective~~including ~~manner~~data ~~through~~on ~~our~~how ~~mobile~~the ~~app~~car is driven. WeThis ~~depend~~has insignificantly ~~large~~hindered ~~part~~our onability ~~search~~to ~~engines,~~offer ~~social~~cost-competitive ~~media~~insurance ~~platforms,~~policies ~~digital~~in ~~app~~California ~~stores~~and, ~~content-based~~if ~~online~~other ~~advertising~~states ~~and~~were ~~other~~to ~~online~~pass ~~sources~~similar ~~for~~laws ~~traffic~~or toregulations, ~~our~~would ~~website~~impede ~~and~~ our ~~mobile~~ability ~~app,~~to ~~which~~offer ~~are~~insurance ~~material~~policies ~~sources~~in ~~for~~those ~~new consumers~~states.

~~With~~Although ~~respect~~there tois ~~search~~currently ~~engines,~~limited wefederal ~~are~~and ~~included~~state inlegislation ~~search~~outside ~~results~~of asCalifornia arestricting ~~result~~our ofability ~~both~~to ~~paid~~collect ~~search~~driving ~~listings~~behavior data, ~~where~~private weorganizations ~~purchase~~are ~~specific~~implementing ~~search~~principles ~~terms~~and ~~that~~guidelines ~~result~~to inprotect ~~the~~driver ~~inclusion~~privacy. The Alliance of ~~our~~Automobile ~~advertisement,~~Manufacturers and ~~free~~Global ~~search~~Automakers ~~listings,~~established ~~which~~their ~~depend~~Consumer onPrivacy ~~algorithms~~Protection ~~used~~Principles byto ~~search~~provide ~~engines.~~member ~~For~~automobile ~~paid~~manufacturers ~~search~~with ~~listings,~~a ifframework ~~one~~with orwhich ~~more~~to ofconsider ~~the~~privacy ~~search~~and ~~engines~~build orprivacy ~~other~~into ~~online~~their ~~sources~~products onand ~~which~~services wewhile ~~rely~~the ~~modifies~~National orAutomobile ~~terminates~~Dealers ~~its~~Association ~~relationship~~has partnered with ~~us,~~the ~~our~~Future ~~expenses~~of ~~could~~Privacy ~~rise~~Forum ifto weproduce ~~have~~consumer toeducation ~~pay~~guidelines athat ~~higher~~explain ~~price~~the ~~for~~kinds ~~such~~of ~~listings~~information orthat ifmay be collected by consumers’ cars, the ~~alternatives~~guidelines wethat ~~find~~govern ~~are~~how ~~more~~it ~~expensive,~~is orcollected weand ~~could~~used, ~~lose~~and the options consumers ~~and~~may ~~traffic~~have to ~~our~~protect ~~website,~~their ~~any~~vehicle ofdata. ~~which~~The ~~could~~Global ~~have~~Alliance afor ~~material~~Vehicle ~~adverse~~Data ~~effect~~Access onis ~~our~~another ~~business,~~organization ~~results~~that ofwas ~~operations~~formed ~~and~~to ~~financial~~advocate ~~condition.~~for ~~For~~driver ~~free~~ownership ~~search~~of ~~listings~~all vehicle data, ifparticularly ~~search~~for ~~engines~~insurance onunderwriting ~~which~~purposes. weIf ~~rely~~federal ~~for~~or ~~algorithmic~~state ~~listings~~legislators ~~modify~~pass ~~their~~laws ~~algorithms,~~limiting our ~~websites~~ability ~~may~~to ~~appear~~collect ~~less prominently~~ or ~~not~~obtain atdriver ~~all~~data, inparticularly ~~search~~through ~~results~~driver’s smartphones, ~~which~~such ~~could~~legislation ~~result~~would inhave ~~reduced~~a ~~traffic~~material toadverse effect on our ~~websites~~business, ~~and~~results ~~fewer~~of ~~new~~operations, ~~customers.~~financial condition and prospects.

~~Our~~In ~~ability~~2024, tonews ~~maintain~~reports orabout ~~increase~~certain ~~the~~automobile ~~number~~manufacturers’ collection of ~~consumers~~driving ~~who~~behavioral ~~purchase~~data, ~~our~~and ~~products~~the ~~after~~means ~~being~~of ~~directed~~obtaining toconsent ~~our~~for ~~website~~the orsame, ~~our~~and ~~mobile~~the ~~app~~subsequent ~~from~~sale ~~other~~of ~~digital~~this ~~platforms~~vehicle-derived ~~depends~~telematics ondata ~~many~~to ~~factors~~third-party ~~that~~brokers, ~~are~~and ~~not~~then ~~within~~eventually ~~our~~to ~~control. Search engines~~insurers, ~~social~~drew ~~media~~national ~~platforms~~attention. ~~and~~State ~~other~~attorneys ~~online~~general ~~sources often revise their algorithms~~ and ~~introduce~~private ~~new~~litigants ~~advertising~~initiated ~~products.~~investigative Ifactivities ~~one~~and orlitigation ~~more~~against certain of ~~the~~these ~~search~~manufacturers ~~engines~~and orbrokers. ~~other~~If ~~online~~consumer ~~sources~~sentiment, onlegislation, ~~which~~litigation, weor ~~rely~~a ~~for~~combination ~~traffic~~of tothese, ~~our website and our mobile app~~ were to ~~modify~~materially ~~its~~impact ~~general methodology for how it displays~~ our ~~advertisements~~ability orto ~~keyword search results~~collect, ~~resulting~~obtain inand ~~fewer~~use ~~consumers~~telematics ~~clicking~~data, ~~through~~it towould ~~our~~have ~~website~~a ~~and~~material ~~our~~adverse ~~mobile~~effect ~~app,~~on our business, ~~and operating~~ results ~~are likely to suffer. In addition, if our online display advertisements are no longer effective or are not able to reach certain consumers due to consumers’ use~~ of ~~ad-blocking software~~operations, ~~our~~financial ~~business~~condition and ~~operating results could suffer~~prospects.

~~Additionally,~~Some ~~changes~~regulators inhave ~~regulations~~expressed ~~could~~interest ~~limit~~in the ~~ability~~use of ~~search~~external ~~engines~~data sources, algorithms and/or ~~social~~predictive ~~media~~models ~~platforms~~in insurance underwriting or rating. Specifically, ~~including~~regulators ~~but~~have ~~not~~raised ~~limited~~questions toabout ~~Google~~the ~~and~~potential ~~Facebook,~~for tounfair ~~collect~~discrimination, ~~data~~adequacy ~~from~~of ~~users~~consent and ~~engage~~lack inof ~~targeted~~transparency ~~advertising,~~associated ~~making~~with ~~them~~the ~~less~~use ~~effective~~of inexternal ~~disseminating~~consumer ~~our~~data. ~~advertisements~~A todetermination ~~our~~by ~~target~~federal ~~customers.~~or ~~For~~state ~~example,~~regulators that the ~~proposed~~data ~~Designing~~points ~~Accounting~~we ~~Safeguards~~collect toor ~~Help~~obtain ~~Broaden~~and ~~Oversight~~the ~~and~~process ~~Regulations~~we onuse ~~Data,~~for collecting or ~~DASHBOARD,~~obtaining ~~Act~~data unfairly discriminates against a protected class of people could subject us to fines and

~~would~~other ~~mandate~~sanctions, ~~annual~~including, ~~disclosure~~but tonot ~~the~~limited ~~SEC~~to, ofdisciplinary ~~the~~action, ~~type~~revocation and ~~“aggregate~~suspension ~~value”~~ of ~~user~~licenses, ~~data~~regulatory ~~used~~fines byand ~~harvesting~~other ~~companies~~sanctions, ~~such~~and aswithdrawal ~~Facebook,~~of ~~Google~~product ~~and~~forms. ~~Amazon,~~Any ~~including~~such ~~how~~event ~~revenue~~could, isin ~~generated~~turn, bymaterially ~~user data~~ and ~~what~~adversely ~~measures~~affect ~~are~~our ~~taken~~business, toresults ~~protect the data. If the costs~~ of ~~advertising~~operations, onfinancial ~~search~~condition ~~engines~~ and ~~social~~prospects. ~~media~~Although ~~platforms increase,~~ we ~~may~~have ~~incur~~implemented ~~additional~~policies ~~marketing~~and ~~expenses~~procedures orinto beour ~~required~~business tooperations ~~allocate~~that awe ~~larger~~feel ~~portion~~are ofappropriately ~~our~~calibrated ~~marketing spend~~ to ~~other channels and~~ our ~~business~~machine learning and ~~operating~~automation-driven ~~results could be adversely affected. Similarly~~operations, ~~changes~~these topolicies ~~regulations applicable to the insurance brokerage~~ and ~~distribution~~procedures ~~business~~ may ~~limit~~prove ~~our~~inadequate ~~ability~~ to ~~rely~~manage onour ~~key~~use ~~distribution~~of ~~platforms,~~this ~~such~~nascent ~~as the Root API~~technology, ifresulting ~~the~~in ~~third-party~~a ~~distribution~~greater ~~platforms~~likelihood ~~are~~of ~~unable~~inadvertent tolegal ~~continue~~or tocompliance ~~distribute our insurance products without an insurance producer license pursuant to applicable insurance laws and regulations~~failures.

~~From~~Regulators ~~time~~may also require us to ~~time~~disclose ~~(including~~the inexternal ~~2023),~~data ~~competition~~we ~~for~~use ~~limited~~from third parties, algorithms and/or ~~high-value~~predictive ~~advertising~~models ~~space~~prior ~~from~~to approving our ~~competitors~~underwriting ormodels ~~other~~and ~~companies~~rates. ~~can~~Such ~~result~~disclosures, inif ~~increases~~mandated, incould ~~the~~put ~~costs~~our intellectual property at risk. While we ~~incur~~take insteps to protect our ~~marketing~~intellectual ~~efforts.~~property ~~These~~when ~~increases~~seeking approvals as required from regulators, and in responding to ~~our~~periodic ~~customer~~requests ~~acquisition~~for ~~costs~~information ~~depend~~and onexaminations, acertain ~~number~~regulators ofhave ~~factors~~already ~~outside~~sought ofsuch ~~our~~information ~~control~~to a limited extent, and ~~can~~we ~~negatively~~cannot ~~affect~~assure you that our ~~business~~intellectual ~~and~~property ~~operating~~will ~~results~~be protected in all instances.

~~The~~Additionally, ~~marketing~~existing oflaws, ~~our~~future ~~insurance~~laws, ~~products~~and ~~depends~~evolving onattitudes ~~our~~about ~~ability~~privacy toprotection ~~cultivate~~may ~~and~~impair ~~maintain~~our ~~cost-effective~~ability ~~and~~to ~~otherwise~~collect, ~~satisfactory relationships with digital app stores~~obtain, ~~in particular~~use, ~~those operated by Google~~ and ~~Apple.~~maintain Asdata wepoints ~~grow,~~of wesufficient ~~may~~type ~~struggle~~or quantity to ~~maintain~~develop ~~cost-effective marketing strategies,~~ and train our ~~customer~~algorithms. ~~acquisition~~If ~~costs~~such ~~could~~laws ~~rise~~or ~~substantially.~~regulations ~~Furthermore,~~were ~~because~~enacted ~~many~~federally ofor ~~our~~in ~~customers~~a ~~access~~large ~~our~~number ~~insurance~~of ~~products~~states ~~through~~in awhich ~~mobile~~we ~~app~~operate, weit ~~depend~~would onimpact the ~~Apple~~integrity ~~App~~and ~~Store~~quality ~~and~~of ~~the~~our ~~Google~~pricing ~~Play~~and ~~Store~~underwriting toprocesses, ~~distribute~~as ~~our~~it ~~mobile~~already ~~app.~~has in California.

~~Operating~~We ~~system~~may ~~platforms~~fail ~~and~~to ~~application~~maintain ~~stores~~an ~~controlled~~effective bypartnership ~~third~~channel ~~parties~~offering, ~~such~~including asour ~~Apple~~embedded ~~and~~insurance ~~Google,~~product ~~may~~and ~~change~~our ~~their~~independent ~~terms~~agent ofplatform ~~service~~ and/or ~~policies~~fail ~~in a manner that increases our costs or impacts our ability~~ to ~~distribute~~perform ~~our~~under ~~mobile~~the ~~app,~~associated ~~collect~~commercial ~~data through it and market our products~~arrangements.

We ~~are~~entered ~~subject~~into toa ~~the~~commercial ~~terms~~agreement ofwith ~~service~~Carvana ~~and~~on ~~policies~~October ~~governing~~1, 2021, in which the ~~operating~~parties ~~system~~agreed ~~platforms~~to ondevelop ~~which~~an ~~our~~integrated ~~mobile~~automobile ~~app~~insurance ~~runs~~solution ~~and~~for ~~the~~Carvana’s ~~application~~online ~~stores~~car ~~through~~buying ~~which~~platform, and we ~~distribute~~pay ~~our~~commissions ~~mobile~~to ~~app,~~Carvana ~~such~~for asinsurance ~~those~~policies ~~operated~~purchased by ~~Apple~~Carvana ~~and Google~~customers. ~~These~~The ~~terms~~commercial ofagreement ~~service~~includes ~~and~~exclusivity ~~policies~~rights ~~govern~~to ~~the~~offer ~~distribution,~~automobile ~~operation~~insurance on Carvana’s platform, and ~~promotion~~we ofwill ~~applications~~partner onexclusively ~~such~~with ~~platforms~~Carvana ~~and~~for ~~stores~~an enterprise total loss replacement vehicle solution. ~~These~~In ~~platforms~~addition, we are a party to and ~~stores~~are ~~have~~pursuing ~~broad~~commercial ~~discretion~~arrangements towith ~~change~~other ~~and~~potential ~~interpret~~partners ~~their~~with ~~terms~~varying levels of ~~service~~integration, ~~and~~including ~~policies~~utilization inof aan ~~manner~~embedded ~~that~~insurance ~~may~~offering. ~~adversely~~If ~~affect~~we or our ~~business.~~commercial ~~For~~counterparties, ~~example~~including Carvana, are unable to satisfy obligations under commercial arrangements, if we are unable to maintain effective partnership arrangements, including an ~~operating~~embedded ~~system~~insurance product and our independent agent platform, orif ~~application~~we ~~store~~are ~~may~~unable ~~increase~~to ~~its~~contract ~~access~~with ~~fees~~additional partners to utilize these products, ~~restrict~~or ~~the~~if ~~collection~~our ofpartners ~~data~~experience ~~through~~difficulty ~~mobile~~with ~~apps~~their ~~that~~businesses ~~run~~or onif ~~those~~they ~~platforms,~~or ~~restrict~~we ~~how~~are unable to attract insurance customers, that ~~data~~could ishave ~~used~~a material and ~~shared,~~adverse ~~and~~effect ~~limit~~on ~~how~~our ~~mobile~~business, ~~app~~results ~~publishers~~of ~~advertise~~operations, ~~online.~~financial condition and prospects.

~~Additionally,~~We ~~limitations~~depend on ~~our~~search ~~ability~~engines, tosocial ~~collect~~media platforms, ~~use~~digital orapp ~~share~~stores, ~~telematics~~content-based online advertising and other ~~data~~online ~~derived~~sources ~~from~~to ~~customer~~attract ~~activities~~consumers onto ~~smartphones,~~our aswebsite ~~well~~and asour ~~new~~mobile ~~technologies~~app ~~that~~both ~~block~~rapidly ~~our~~and ~~ability~~cost-effectively. toIf ~~collect,~~these ~~use~~third parties change their listings or ~~share~~increase ~~such~~their ~~data~~pricing, ~~could~~if ~~significantly~~our ~~diminish~~relationships ~~the~~with ~~value~~them ofdeteriorate or terminate, or if other factors related to these third parties arise which are beyond our ~~platform~~control, we may be unable to attract new customers rapidly and ~~have~~cost-effectively, anwhich ~~adverse~~would ~~effect~~adversely onaffect our ~~ability~~business, toresults ~~generate~~of ~~revenue.~~operations and prospects.

~~Limitations~~Our orsuccess ~~blockages~~depends on our ability to ~~collect,~~attract ~~use~~consumers orto ~~share~~our ~~data~~website ~~derived~~and ~~from use of our~~ mobile app ~~may~~and ~~also~~convert ~~restrict~~them ~~our~~into ~~ability~~customers toin ~~analyze~~a ~~such~~rapid ~~data~~and tocost-effective ~~facilitate~~manner through our ~~product~~mobile ~~improvement, research and development and advertising activities~~app. ~~For~~We ~~example,~~depend in ~~2021,~~large ~~Apple~~part ~~implemented~~on asearch ~~requirement~~engines, ~~for~~social ~~applications~~media ~~using~~platforms, ~~its~~digital ~~mobile~~app ~~operating~~stores, ~~systems to obtain an end~~content-~~user’s~~based ~~permission~~online toadvertising ~~track~~and ~~them~~other oronline ~~access~~sources ~~their device’s advertising identifier~~ for ~~advertising~~traffic ~~and~~to ~~advertising~~our ~~measurement~~website ~~purposes. These~~ and ~~other~~our ~~restrictions~~mobile ~~that~~app, ~~have~~which ~~been~~are ormaterial ~~could~~sources befor ~~implemented~~new ~~in the future could adversely affect our business~~consumers.

IfWith werespect ~~were~~ to ~~violate~~search engines, orwe beare ~~perceived~~included toin ~~have~~search ~~violated,~~results ~~the~~as ~~terms~~a result of ~~service~~both orpaid ~~policies~~search oflistings, anwhere ~~operating~~we ~~system~~purchase ~~platform~~specific orsearch ~~application~~terms ~~store,~~that result in the ~~provider~~inclusion ~~may~~of ~~limit~~our oradvertisement, ~~block~~and ~~our~~free ~~access~~search tolistings, itwhich depend on algorithms used by search engines. ItFor ispaid ~~possible~~search ~~that~~listings, anif ~~operating~~one ~~system~~or ~~platform~~more of the search engines or ~~application~~other ~~store~~online ~~might~~sources ~~limit,~~on ~~eliminate~~which we rely modifies or ~~otherwise~~terminates ~~interfere~~its relationship with ~~the~~us, ~~distribution~~we ofhave ~~our~~to ~~mobile~~pay ~~app,~~a higher price for such listings or if the ~~features~~alternatives we ~~provide~~find ~~and~~are ~~the~~more ~~manner~~expensive, our expenses have in ~~which~~the wepast ~~market~~and ~~our~~would ~~mobile~~again ~~app~~rise, or ~~give~~we ~~preferential~~could ~~treatment~~lose onconsumers ~~their~~and ~~platforms~~traffic orto ~~stores~~our towebsite, aany ~~competitor.~~of Towhich ~~the~~could ~~extent~~have ~~either~~a ofmaterial ~~these~~adverse ~~occur,~~effect on our business, results of operations, ~~and~~ financial condition ~~could~~and beprospects. ~~adversely~~For ~~affected.~~free search listings, if search engines on which

Furthermore, one of the factors we use to evaluate our customer satisfaction and market position is our Apple App Store ratings. This rating, however, may not be a reliable indicator of our customer satisfaction relative to other companies who are rated on the Apple App Store since, to date, we have received a fraction of the number of

~~reviews~~we ofrely ~~some~~for ofalgorithmic ~~the~~listings ~~companies~~modify wetheir ~~benchmark~~algorithms, ~~against~~our website may appear less prominently or not at all in search results, ~~and~~which ~~thus~~could result in reduced traffic to our ~~number~~website ofand ~~positive~~our ~~reviews~~mobile ~~may~~app ~~not~~and befewer asnew ~~meaningful~~customers.

Our ~~expansion~~ability ~~within~~to maintain or increase the ~~United~~number ~~States~~of ~~will~~consumers ~~subject~~who uspurchase our products after being directed to ~~additional~~our ~~regulatory~~website ~~approvals~~or our mobile app from other digital platforms depends on many factors that are not within our control. Search engines, social media platforms and ~~costs~~other online sources often revise their algorithms and ~~risks~~introduce new advertising products. If one or more of the search engines or other online sources on which we rely for traffic to our website and our mobile app were to modify its general methodology for how it displays our advertisements or keyword search results, resulting in fewer consumers clicking through to our website and our ~~plans~~mobile ~~may~~app, our business and operating results will suffer. In addition, if our online display advertisements are no longer effective or are not beable ~~successful~~to reach certain consumers due to consumers’ use of ad-blocking software, our business and operating results will suffer.

~~Our~~Additionally, ~~success~~changes ~~depends~~ in ~~significant~~regulations ~~part~~could onlimit ~~our~~the ability toof ~~expand~~search ~~into~~engines ~~additional~~and ~~markets~~social inmedia ~~the~~platforms, ~~United~~including ~~States.~~but Wenot ~~currently~~limited ~~hold~~to ~~Certificates~~Google ofand ~~Authority~~Facebook, into 50collect ~~states~~data from users and ~~the~~engage ~~District~~in oftargeted ~~Columbia~~advertising, ~~and~~making ~~operate~~them less effective in 34disseminating ofour ~~those~~advertisements ~~states~~to our target customers. WeFor ~~plan~~example, tothe ~~have~~proposed aDesigning ~~presence~~Accounting inSafeguards ~~all~~to 50Help ~~states~~Broaden Oversight and Regulations on Data, or DASHBOARD, Act would mandate annual disclosure to the ~~District~~SEC of ~~Columbia~~the type and “aggregate value” of user data used by harvesting companies, ~~but~~such ~~cannot~~as ~~guarantee~~Facebook, ~~that~~Google weand ~~will~~Amazon, beincluding ~~able~~how revenue is generated by user data and what measures are taken to ~~provide~~protect ~~nationwide~~the ~~coverage~~data. If the costs of advertising on ~~that~~search ~~timeline~~engines orand atsocial ~~all.~~media ~~Generally~~platforms increase, ~~regulators~~we have in ~~states~~the inpast ~~which~~and ~~our~~will ~~applications~~again ~~were~~incur ~~withdrawn~~additional ~~preferred~~marketing ~~that~~expenses weand ~~seek~~be ~~approval~~required atto ~~such~~allocate ~~time~~a ~~that~~larger weportion ~~could~~of ~~demonstrate~~our anmarketing ~~underwriting~~spend ~~profit~~to other channels and~~/or~~ ~~willingness~~our business and operating results could be adversely affected. Similarly, changes to ~~commit~~regulations applicable to athe ~~risk-based~~insurance ~~capital~~brokerage ~~position~~and ~~greater~~distribution ~~than~~business ~~what~~may ~~had~~limit ~~been~~our ~~required~~ability byto ~~the~~rely ~~Ohio~~on ~~Department~~key ofdistribution ~~Insurance~~platforms, orsuch as the ~~Ohio~~Root ~~DOI~~API, if the third-party distribution platforms are unable to continue to distribute our insurance products without an insurance producer license pursuant to applicable insurance laws and regulations.

AsFrom wetime ~~seek~~ to ~~expand~~time (including in ~~the United States~~2024), wecompetition ~~may~~for ~~incur~~limited ~~significant~~and/or ~~operating~~high-value ~~expenses,~~advertising ~~including~~space ~~expenses~~from inour ~~connection~~competitors ~~with~~or ~~securing~~other ~~applicable~~companies ~~regulatory~~can ~~approvals,~~result ~~marketing,~~in ~~hiring~~increases ~~additional~~in ~~personnel,~~the ~~engaging~~costs ~~third-party~~we ~~service~~incur ~~providers~~in ~~and~~our ~~other~~marketing ~~research~~efforts. ~~and~~Our ~~development~~customer acquisition costs. Ifcan wevary ~~invest~~by ~~substantial~~channel ~~time~~mix, ~~and~~by ~~resources~~state, due to ~~expand~~seasonality, ~~our~~or ~~operations~~due ~~while~~to the competitive environment. These increases to our ~~revenues~~customer ~~from~~acquisition ~~those~~costs ~~additional~~depend ~~operations~~on doa ~~not~~number ~~exceed~~of ~~the~~factors ~~expense~~outside of ~~establishing~~our control and ~~maintaining~~can ~~them,~~negatively oraffect ifour webusiness ~~are~~and ~~unable~~operating toresults. ~~manage~~As ~~these~~we ~~risks effectively~~grow, ~~our~~we ~~business,~~may ~~results~~struggle ofto ~~operations~~maintain cost-effective marketing strategies, and ~~financial~~our ~~condition~~customer ~~could~~acquisition becosts ~~adversely~~could ~~affected~~rise substantially.

~~Moreover,~~The marketing of our ~~expansion~~insurance ~~may~~products ~~not~~depends beon ~~successful~~our ~~for~~ability ato ~~variety~~cultivate ofand ~~reasons~~maintain cost-effective and otherwise satisfactory relationships with digital app stores, ~~including~~in particular, those operated by Google and Apple. Furthermore, because many of: our customers access our insurance products through a mobile app, we depend on the Apple App Store and the Google Play Store to distribute our mobile app.

~~•one~~Operating orsystem ~~more~~platforms ~~states~~and ~~could~~application ~~revoke~~stores ~~our~~controlled ~~license~~by tothird ~~operate~~parties, such as Apple and Google, may change their terms of service or ~~implement~~policies ~~additional~~in ~~regulatory~~a ~~hurdles~~manner that ~~could~~increases ~~preclude~~our costs or ~~inhibit~~impacts our ability to ~~obtain~~distribute orour ~~maintain~~mobile ~~our~~app, ~~license~~collect indata ~~such~~through ~~state;~~it and market our products.

We are subject to the terms of service and policies governing the operating system platforms on which our mobile app runs and the application stores through which we distribute our mobile app, in particular, those operated by Apple and Google. These terms of service and policies govern the distribution, operation and promotion of applications on such platforms and stores. These platforms and stores have broad discretion to change and interpret their terms of service and policies in a manner that may adversely affect our business. For example, an operating system platform or application store may increase its access fees, restrict the collection of data through mobile apps that run on those platforms, restrict access to sensors contained on the mobile devices, restrict how that data is or may be used and shared, and limit how mobile app publishers advertise online.

Additionally, limitations on our ability to collect, obtain or use telematics and other data derived from customer activities on smartphones, as well as new technologies that block our ability to collect or use such data, would

significantly diminish the value of our platform and have an adverse effect on our business, operating results, financial condition and prospects.

Limitations or blockages on our ability to collect, obtain, use or share data derived from use of our mobile app would also restrict our ability to analyze such data to facilitate our product improvement, research and development and advertising activities. For example, in 2021, Apple implemented a requirement for applications using its mobile operating systems to obtain an end-user’s permission to track them or access their device’s advertising identifier for advertising and advertising measurement purposes. These and other restrictions that have been or could be implemented in the future could adversely affect our business.

If we were to violate, or be perceived to have violated, the terms of service or policies of an operating system platform or application store, the provider may limit or block our access to it. It is possible that an operating system platform or application store might limit, eliminate or otherwise interfere with the distribution of our mobile app, the features we provide and the manner in which we market our mobile app, or give preferential treatment on their platforms or stores to a competitor. To the extent either of these occur, our business, results of operations, financial condition and prospects would be adversely affected.

Further, one of the factors we use to evaluate our customer satisfaction and market position is our Apple App Store ratings. This rating may not be a reliable indicator of our customer satisfaction relative to other companies who are rated on the Apple App Store since, to date, we have received a fraction of the number of reviews compared to the companies we benchmark against, and thus our number of positive reviews is not as meaningful.

Our expansion within the U.S. will subject us to additional regulatory approvals and costs and risks, and our plans may not be successful.

Our success depends in significant part on our ability to expand into additional markets in the U.S. We currently hold Certificates of Authority in 50 states and the District of Columbia and operate in 35 of those states. We plan to have a presence in all 50 states and the District of Columbia, but cannot and do not guarantee that we will be able to provide nationwide coverage on any particular timeline or at all. In order to gain approval to operate in certain states, we have agreed to certain limitations on our licenses, and we may need to agree to additional limitations imposed by other states. Generally, regulators in states (i) in which we have valid licenses but are not selling insurance or (ii) into which we are considering entering with an affiliated underwriting company, have preferred that we only begin selling insurance or entering the state with an affiliated underwriting company at such time that we can demonstrate that we have met certain financial performance metrics.

As we seek to expand in the U.S., we will incur significant incremental operating expenses, including expenses in connection with securing applicable regulatory approvals, marketing, hiring additional personnel, engaging third-party service providers and other research and development costs. We have invested and expect to continue to invest substantial time and resources to expand our operations and revenues from those additional operations may not exceed the expense of establishing and maintaining them. If we are unable to manage these risks effectively, our business, results of operations, financial condition and prospects will be adversely affected.

Moreover, our countrywide expansion has taken a substantial number of years to date, and may not be successful for a variety of reasons, including because of:

•one or more states could revoke our license to operate, or implement additional regulatory or financial requirements that could preclude or inhibit our ability to obtain or maintain our license in such state;

•failures in identifying and entering into joint ventures with strategic partners, or entering into joint ventures that do not produce the desired results;

•challenges in, and the cost of, complying with various laws and regulatory standards, including with respect to the insurance business and insurance distribution, capital and outsourcing requirements, data privacy, tax, litigation and local regulatory restrictions;

•difficulty in recruiting and retaining licensed (where required), talented and capable employees;

~~•competition from local incumbents that already own market share, better understand the local market, may market and operate more effectively and may enjoy greater local affinity or awareness;~~ 23

•~~differing~~competition ~~demand~~from ~~dynamics~~local incumbents that already own market share and better understand the local market, ~~which~~may operate more effectively and may ~~make~~enjoy ~~our~~greater ~~product~~local ~~offerings~~affinity ~~less~~or ~~successful~~awareness with customers;

•differing demand dynamics, which may make our product offerings less successful; and

•limitations on the repatriation and investment of funds.

If we fail to grow our geographic footprint or geographic growth occurs at a slower rate than expected, our business, results of operations, ~~and~~ financial condition and prospects could be materially and adversely affected.

Our technology platform may not operate properly or as we expect it to operate.

We utilize our technology platform to gather customer data in order to determine whether or not to write and how to price our insurance products. Similarly, we use our technology platform to process many of our claims. Our technology platform is expensive and complex, its continuous development, maintenance and operation may encounter ~~unforeseen~~ difficulties including material performance problems or ~~undetected~~ defects or errors. We may encounter technical obstacles, and it is possible that we may discover additional problems that prevent our technology from operating properly. If our platform does not function reliably, we may incorrectly select our customers, incorrectly price insurance products for our customers or incorrectly pay or deny claims made by our customers. These errors could cause us to select an uneconomic mix of customers, encounter customer dissatisfaction, which could lead customers to cancel or fail to renew their insurance policies with us or make it less likely that prospective customers obtain new insurance policies, underprice policies or overpay claims, or incorrectly adjust or deny policyholder claims and become subject to liability. Additionally, technology platform errors may lead to unintentional bias and discrimination in the underwriting and claims process, which would subject us to legal or regulatory liability and harm our brand and reputation. Any of these alone or in combination could result in a material adverse effect on our business, results of operations, financial condition and prospects.

22While we believe our telematics-based pricing model to be more fair for consumers when compared to traditional insurers’ offerings, it may also yield results that customers themselves nonetheless find unfair. For instance, we may quote certain drivers higher premiums than our competitors, if our model determines that the driver is higher risk even though their higher-risk driving has not resulted in a claim. Such a perception of unfairness could negatively impact our brand and reputation.

deny policyholder claims and become subject to liability. Additionally, technology platform errors may lead to unintentional bias and discrimination in the underwriting process, which could subject us to legal or regulatory liability and harm our brand and reputation. Any of these eventualities could result in a material adverse effect on our business, results of operations and financial condition.

While we believe our telematics-based pricing model to be more fair to consumers, it may yield results that customers find unfair. For instance, we may quote certain drivers higher premiums than our competitors, if our model determines that the driver is higher risk even though their higher-risk driving has not resulted in a claim. Such perception of unfairness could negatively impact our brand and reputation.

Regulators may limit our ability to develop or implement our telematics-based pricing model and/or may eliminate or restrict the confidentiality of our proprietary technology.

Our ~~future~~ success depends on our ability to continue to develop and implement our telematics-based pricing model, and to maintain the confidentiality of our proprietary technology. Changes to existing regulations, their interpretation or implementation, or new regulations could impede our use of this technology or require that we disclose our proprietary technology to our competitors and/or regulators, which ~~could~~would negatively impact our competitive position and result in a material adverse effect on our business, results of operations, ~~and~~ financial condition and prospects. For example, ~~California~~as ~~voters~~explained ~~recently approved the California Privacy Rights and Enforcement Act~~above, or the ~~CPRA,~~matters ~~which~~involving ~~became~~certain ~~effective~~automobile ~~January~~manufacturers’ ~~1, 2023,~~ and ~~which~~third-party ~~affords~~brokers’ ~~California~~collection ~~residents~~and ~~significantly~~sharing ~~more~~of ~~control~~telematics ~~over~~data ~~their~~may ~~personal~~prompt ~~information,~~changes ~~which~~in ~~could~~the ~~require~~quality ~~disclosure~~and availability of ~~certain~~telematics ~~business~~data ~~sensitive~~for oruse ~~confidential~~by ~~information~~us ~~depending~~and onothers ~~how~~in the ~~CPRA~~insurance isindustry, ~~interpreted~~as ~~and~~well ~~applied~~as bychanges ~~the~~to ~~regulators.~~existing ~~The~~laws ~~CPRA~~ and ~~associated~~ regulations ~~could~~and ~~require~~their ~~disclosure~~interpretation ofor ~~our~~implementation. ~~proprietary~~Our ~~technology~~business, ~~limit~~results ~~the effectiveness~~ of ~~our~~operations, ~~products~~financial condition and ~~reduce~~prospects ~~demand~~could ~~for~~be ~~them~~adversely ~~through~~affected ~~the~~by ~~broadly~~any ~~written, and anticipated broad interpretation,~~ of ~~the~~these ~~CPRA requirements and implementing regulations~~factors.

We are subject to full scope financial examinations by state insurance regulatory authorities in ~~Ohio,~~each ~~where~~state ~~each~~in ofwhich our ~~domestic~~ insurance company subsidiaries isare domiciled, which could result in adverse examination findings and necessitate remedial actions.

State insurance regulators perform examinations of insurance companies under their jurisdiction to assess compliance with applicable laws and regulations, financial condition and the conduct of regulated activities at least every three to five years. Root Insurance Company is Ohio-domiciled and has completed ~~its first~~ financial ~~examination~~examinations with the Ohio DOI, which ~~includes~~include a review of the Company’s financials, governance, and operations, including its relationships and transactions with affiliates, and a specific examination of our pricing and underwriting methodologies and our regulatory capital, and is currently undergoing its second review. Similarly, Root Property & Casualty is an Ohio-domiciled insurer and completed a similar financial examination by the Delaware DOI prior to its redomestication as an Ohio-domiciled insurer. It is also currently undergoing a financial examination with the Ohio DOI. If, as a result of ongoing or future examinations, our regulators determine that our financial condition, capital resources or other aspects of any of our operations are not satisfactory, or that we have violated applicable laws or regulations, such regulator may subject us to fines or other penalties and/or require us to take one or more remedial actions or otherwise subject us to regulatory scrutiny, such as pursuant to an enforcement action or, in the case of regulatory capital, require us to maintain additional capital. The results of the examinations are a matter of public record, and our reputation may also be harmed by such penalties. For more information regarding our financial condition examinations, see the section titled “Periodic Examinations” in the “Insurance Regulation” section of Item 1. Business.

We are subject to market conduct examinations by state insurance regulatory authorities in any state in which our domestic insurance subsidiaries issue insurance policies, which could result in adverse examination findings and necessitate remedial actions.

Our domestic insurance subsidiaries are also subject to other investigations or inquiries, including market conduct examinations, in any state in which they issue policies. These examinations can result in fines and other monetary penalties, as well as other regulatory orders requiring remedial, injunctive, or other corrective action. For example, Root Insurance Company was subject to a market conduct examination by the Virginia State Corporation

Commission’s Bureau of Insurance, and in addition to requiring the company to undertake remedial action, the Bureau fined the company for various market conduct violations. Any regulatory or enforcement action or any regulatory order imposing remedial, injunctive, or other corrective action against us resulting from an examination could have a material adverse effect on our business, reputation, financial condition or results of operations. For more information regarding our previous and ongoing market conduct examinations, see the section titled “Periodic Examinations” in the “Insurance Regulation” section of Item 1 Business.

Our exposure to loss activity and regulation may be greater in states where we currently have most of our customers: Texas, Georgia and Colorado.

Approximately 36.0% of our gross premiums written for the year ended December 31, 2023 originated from customers in Texas, Georgia and Colorado. As a result of this concentration, if a significant catastrophic event or series of catastrophic events occur, and cause material losses in Texas, Georgia or Colorado, our business, financial condition and results of operation could be materially adversely affected. Further, as compared to our competitors who operate on a wider geographic scale, any adverse changes in the regulatory environment affecting property and casualty insurance in Texas, Georgia or Colorado may expose us to more significant risks.

We are subject to stringent and changing privacy and data security laws, regulations, and standards related to data privacy and security, increasing the complexity of compliance. Our actual or perceived failure to comply with such obligations could harm our reputation, subject us to significant fines and liability, or adversely affect our business.

In the United States, insurance companies are subject to the privacy provisions of the federal Gramm-Leach-Bliley Act and the NAIC Insurance Information and Privacy Protection Model Act, as adopted and implemented by certain state legislatures and insurance regulators. The regulations implementing these laws require insurance companies to disclose their privacy practices to consumers, allow them to opt-in or opt-out, depending on the state, of the sharing of certain personal information with unaffiliated third parties, and maintain certain security controls to protect their information. Violators of these laws face regulatory enforcement action, substantial civil penalties, injunctions, and in some states, private lawsuits for damages. Insurance companies are also subject to state-specific privacy laws governing the use of particular data. For instance, the Illinois Biometric Information Privacy Act regulates the use and storage of biometric data such as fingerprints in the insurance industry and requires the informed written consent from policyholders if the insurance company intends to collect or disclose their personal biometric identifiers.

Privacy and data security regulation in the United States is rapidly evolving. For example, existing laws, such as the CCPA, which became effective January 1, 2020, future laws, and evolving attitudes about privacy protection may impair our ability to collect, use, and maintain data points of sufficient type or quantity to develop and train our algorithms. The CCPA gives California residents expanded rights to access and require deletion of certain of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches, which is expected to increase the volume and success of class action data breach litigation. In addition to increasing our compliance costs and potential liability, the CCPA’s restrictions on “sales” of personal information may restrict our use of cookies and similar technologies for advertising purposes. The CCPA excludes information covered by Gramm-Leach-Bliley Act, the Driver’s Privacy Protection Act or the California Financial Information Privacy Act from the CCPA’s scope, but the CCPA’s definition of “personal information” is broad and may encompass other information that we maintain.

The requirements of the CCPA expanded substantially in January 2023 as a result of California voters approving the CPRA in November 2020. The CPRA, effective January 1, 2023, gives California residents the ability to: limit use of precise geolocation information and other categories of information classified as “sensitive”; add e-mail addresses and passwords to the list of personal information that, if lost or breached, would entitle affected individuals to bring private lawsuits; and establish the California Privacy Protection Agency to implement and enforce the new law, as well as impose administrative fines. The effects of the CCPA, the CPRA, and other similar state or federal laws, are potentially significant and may require us to modify our data processing practices and policies, incur substantial compliance costs and subject us to increased potential liability.

~~Some~~methodologies ~~observers~~and ~~have~~our ~~noted~~regulatory ~~that~~capital, ~~the~~and ~~CCPA~~was ~~and~~most ~~the~~recently ~~CPRA~~reviewed ~~could~~in ~~mark~~2024 resulting in no material findings. Root Property & Casualty Insurance Company is also Ohio-domiciled but completed a similar financial examination by the ~~beginning~~Delaware Department of Insurance prior to its redomestication as an Ohio-domiciled insurer. It also underwent a ~~trend~~financial ~~toward~~examination ~~more~~with ~~stringent~~the ~~privacy~~Ohio ~~legislation~~DOI resulting in ~~the~~no ~~United~~material ~~States~~findings. ~~There~~Newly-formed Root Florida Insurance Company is ~~also~~Florida-domiciled ~~discussion~~will inbe ~~Congress~~subject ofto ~~new~~an ~~comprehensive~~initial ~~federal~~financial ~~data~~examination, ~~protection~~which ~~and~~is ~~privacy~~customary ~~laws~~for tonewly-licensed ~~which~~insurance wesubsidiaries ~~likely~~and ~~would~~which beis ~~subject~~expected to ifbegin ~~enacted.~~in ~~Until~~early an2026, ~~overarching~~though ~~federal~~the ~~privacy~~commencement ~~law~~date is ~~passed~~at the discretion of FOIR. If, ~~however~~as a result of future examinations, itour isregulators ~~anticipated~~determine that ~~individual~~our ~~states~~financial ~~will~~condition, ~~continue~~capital toresources ~~adopt~~or other aspects of any of our operations are not satisfactory, or ~~amend~~that ~~state~~we have violated applicable laws ~~and~~or regulations, ~~governing~~such ~~data~~regulator ~~privacy~~may subject us to fines or other penalties and/or ~~cybersecurity~~require us to take one or more remedial actions or otherwise subject us to regulatory scrutiny, ~~which~~such ~~could~~as ~~increase~~an ~~the~~enforcement ~~cost~~action ~~and~~or, ~~complexity~~in the case of ~~our~~regulatory ~~compliance~~capital, ~~efforts~~require ~~and~~us ~~could~~to ~~impact~~maintain additional capital. The results of the ~~integrity~~examinations ~~and~~are ~~quality~~a matter of ~~our~~public ~~pricing~~record, and ~~underwriting~~our ~~processes~~reputation may also be harmed by penalties. For more information regarding our financial condition examinations, see the section titled “Periodic Examinations” in the “Insurance Regulation” section of Item 1. Business.

~~Additionally,~~We inare ~~response~~subject to ~~the~~market ~~growing~~conduct ~~threat~~examinations ofby ~~cyberattacks~~state ~~in the~~ insurance ~~industry,~~regulatory ~~certain~~authorities jurisdictions have begun to impose new cybersecurity laws and regulations. On October 24, 2017, the NAIC adopted its Insurance Data Security Model Law, intended to serve as model legislation for states to enact in ~~order~~any ~~to govern cybersecurity and data protection practices of insurers, insurance agents, and other licensed entities registered under~~ state insurance laws. At least 22 states have adopted the same or substantially similar versions of the Insurance Data Security Model Law, each with a different effective date, and other states may adopt versions of the Insurance Data Security Model Law in ~~the~~which ~~future.~~our ~~Also in 2017, the New York State Department of Financial Services adopted regulations providing minimum standards for~~ insurance ~~companies’~~subsidiaries ~~cybersecurity~~issue ~~programs, requiring an annual certification confirming compliance. In May 2018, South Carolina passed a cybersecurity bill requiring, among other things, any~~ insurance ~~entity operating in the state to establish and implement a cybersecurity program protecting their business and their customers from a data breach~~policies, towhich investigate data breaches and to notify regulators of a cybersecurity event. Some jurisdictions, such as Connecticut, Massachusetts, Nevada and California have enacted more generalized data security laws that apply to certain data that we process. Additionally, some of the enacted regulations have since been amended to expand and strengthen the established cybersecurity requirements in response to the evolving cybersecurity landscape. Although we take steps to comply with applicable cybersecurity regulations and data security laws, our failure to comply with new or existing cybersecurity regulations could result in ~~material~~adverse ~~regulatory~~examination ~~actions~~findings and ~~other~~necessitate ~~penalties.~~remedial In addition, efforts to comply with new or existing cybersecurity regulations could impose significant costs on our business, which could materially and adversely affect our business, financial condition or results of operationsactions.

~~Additionally,~~Our weinsurance subsidiaries are also subject to ~~the~~other ~~terms~~investigations ofor ~~our~~inquiries, ~~privacy~~including ~~policies,~~market ~~privacy-related~~conduct ~~disclosures~~examinations, ~~and~~in ~~contractual~~any ~~and~~state ~~other~~in ~~privacy-related~~which ~~obligations~~they toissue ~~our customers and other third parties~~policies. WeThese ~~have~~examinations ~~experienced cybersecurity attacks that~~ have resulted in, ~~threat~~and ~~actors~~could ~~obtaining~~in ~~customer~~the ~~personal~~future ~~information~~result in fines and ~~some~~other ofmonetary ~~these~~penalties, ~~events~~as ~~have~~well ~~caused~~as usother toregulatory ~~incur~~orders ~~losses~~requiring remedial, ~~including~~injunctive, ~~regulatory~~or ~~penalties,~~other ~~and~~corrective ~~expend~~action. For ~~resources~~example, toRoot ~~modify~~Insurance ~~our~~Company ~~systems.~~was ~~Any~~subject ~~failure~~to ora ~~perceived~~market ~~failure~~conduct examination by usthe orVirginia ~~third~~State ~~parties~~Corporation weCommission’s ~~work~~Bureau ~~with~~of toInsurance, ~~comply~~or ~~with~~the ~~privacy~~Virginia ~~policies~~DOI, ~~disclosures,~~ and ~~obligations~~in addition to ~~customers~~requiring orthe ~~other~~company ~~third~~to ~~parties~~undertake remedial action, orthe ~~privacy~~Virginia orDOI ~~data~~fined ~~security~~the ~~laws~~company ~~may~~for ~~result~~various inmarket ~~governmental~~conduct orviolations. Any regulatory ~~investigations,~~or enforcement ~~actions,~~action or any regulatory ~~fines,~~order ~~criminal~~imposing ~~compliance~~remedial, ~~orders~~injunctive, ~~litigation~~ or ~~public~~other ~~statements~~corrective action against us byresulting ~~consumer~~from ~~advocacy~~an ~~groups~~examination orcould ~~others,~~have ~~and~~a ~~could~~material ~~cause~~adverse ~~customers~~effect toon ~~lose~~our ~~trust~~business, inreputation, usfinancial condition, ~~all~~results of ~~which~~operations ~~could~~or beprospects. ~~costly~~For more information regarding our previous and ~~have~~ongoing anmarket ~~adverse~~conduct ~~effect~~examinations, onsee ~~our~~the ~~business~~section titled “Periodic Examinations” in the “Insurance Regulation” section of Item 1 Business.

~~Data~~Our ~~security~~exposure ~~breaches,~~to orloss ~~real~~activity orand ~~perceived~~regulation ~~errors,~~may ~~failures~~be orgreater ~~bugs~~ in ~~our~~states orwhere ~~our~~we ~~vendors’~~currently ~~systems~~have ormost ~~our~~of ~~website or app could impair~~ our ~~operations, compromise our confidential information or our~~ customers’: ~~personal information~~Texas, ~~damage~~Georgia ~~our reputation~~ and ~~brand, and harm our business and operating results~~Florida.

~~Our~~Approximately ~~continued~~39.8% ~~success~~of ~~depends on~~ our ~~systems,~~gross ~~applications,~~premiums ~~and~~written ~~software~~for ~~continuing~~the toyear ~~operate~~ended ~~and~~December 31, to2024 ~~meet~~originated ~~the~~from ~~changing needs of our~~ customers ~~and users. We rely on our technology and engineering staff and vendors to successfully implement changes to and maintain our systems and services~~ in anTexas, ~~efficient~~Georgia and ~~secure manner~~Florida. ~~Like~~As ~~all~~a ~~information~~result ~~systems~~of ~~and~~this ~~technology~~concentration, ~~our~~if ~~website~~a ~~and~~significant ~~mobile~~catastrophic ~~app~~event ~~may contain~~ or ~~develop~~series ~~material~~of ~~errors,~~catastrophic ~~failures,~~events ~~vulnerabilities or bugs~~occur, ~~particularly~~and ~~when~~cause ~~new~~material ~~features~~losses orin ~~capabilities are released~~Texas, ~~and~~Georgia ~~are subject to fraud, computer viruses~~ or ~~malicious code~~Florida, ~~phishing~~our ~~attacks~~business, ~~system~~results ~~intrusion,~~of ~~web application attacks~~operation, ~~attempts~~financial tocondition ~~overload~~and ~~our~~prospects ~~servers~~would ~~with~~be ~~denial-of-service~~materially oradversely ~~other~~affected. ~~attacks~~Further, ~~ransomware~~as ~~and~~compared ~~similar~~to ~~incidents~~our orcompetitors ~~disruptions~~who ~~from~~operate ~~unauthorized~~on ~~use~~a ofwider ~~our~~geographic ~~computer systems~~scale, asany ~~well~~adverse aschanges ~~unintentional~~in ~~incidents~~the ~~causing~~legal ~~data~~and ~~leakage,~~regulatory ~~any~~environment ofaffecting ~~which~~property ~~could~~and ~~lead~~casualty toinsurance ~~interruptions~~in Texas, ~~delays~~Georgia or ~~website~~Florida ormay ~~mobile~~expose ~~app~~us ~~shutdowns~~to more significant risks.

~~From~~We ~~time~~are subject to ~~time,~~stringent ~~third~~and ~~parties~~changing ~~may~~privacy ~~misappropriate~~and ~~our~~ data ~~through~~security ~~website~~laws, ~~scraping~~regulations, ~~bots or other means~~ and ~~aggregate~~standards ~~this~~related to data onprivacy ~~their~~and ~~websites~~security, ~~with~~increasing ~~data~~the ~~from~~complexity ~~other~~of ~~companies~~compliance. InOur ~~addition,~~actual ~~copycat websites~~ or ~~mobile~~perceived ~~apps~~failure ~~may misappropriate data and attempt~~ to ~~imitate~~comply ~~our~~with ~~brand~~such orobligations ~~the~~could ~~functionality~~harm of our ~~website~~reputation, orsubject ~~our~~us ~~mobile~~to ~~app.~~significant Iffines weand ~~become aware of such websites or mobile apps~~liability, ~~we intend to employ technological~~ or ~~legal~~adversely ~~measures~~affect inour an business.

In the U.S., insurance companies are subject to the privacy provisions of the federal Gramm-Leach-Bliley Act and the NAIC Insurance Information and Privacy Protection Model Act, as adopted and implemented by certain state legislatures and insurance regulators. The regulations implementing these laws require insurance companies to disclose their privacy practices to consumers, allow them to opt-in or opt-out, depending on the state, of the sharing of certain personal information with unaffiliated third parties, and maintain certain security controls to protect their information. Violators of these laws face regulatory enforcement action, substantial civil penalties, injunctions, and in some states, private lawsuits for damages. Insurance companies are also subject to state-specific privacy laws governing the use of particular data. For instance, the Illinois Biometric Information Privacy Act regulates the use

~~attempt~~and tostorage ~~halt~~of ~~their~~biometric ~~operations.~~data ~~However, we may be unable to detect all~~ such ~~websites~~as orfingerprints ~~mobile apps~~ in athe ~~timely~~insurance ~~manner~~industry and, ~~even~~requires ifthe weinformed ~~could,~~written ~~technological~~consent ~~and~~from ~~legal~~policyholders ~~measures~~if ~~may be insufficient to halt their operations. Regardless of whether we can successfully enforce our rights against~~ the ~~operators~~insurance ofcompany ~~these~~intends ~~websites or mobile apps, any measures that we may take could require us~~ to ~~expend~~collect ~~significant financial~~ or ~~other~~disclose ~~resources,~~their ~~which~~personal ~~could~~biometric ~~harm our business, results of operations or financial condition~~identifiers. ~~In addition, to the extent that such activity creates confusion among consumers or advertisers, our brand and business could be harmed.~~

~~Many~~Privacy ofand ~~our~~data ~~services~~security ~~are~~regulation ~~provided~~in ~~through~~ the ~~Internet~~U.S. ~~which~~is ~~increases~~rapidly ~~our~~evolving. ~~exposure~~For toexample, ~~potential~~existing ~~cybersecurity~~laws, ~~attacks.~~such Inas ~~addition~~the CCPA, wewhich ~~utilize~~became aeffective ~~workforce~~January ~~that~~1, is2020, ~~largely~~future ~~remote~~laws, and evolving attitudes about privacy protection may ~~exacerbate~~impair ~~exposure~~our ability to ~~cyber~~collect, ~~events.~~obtain, Weuse, ~~have~~and ~~experienced~~maintain ~~cybersecurity~~data ~~threats~~points of sufficient type or quantity to develop and train our ~~information~~algorithms. ~~technology~~The ~~infrastructure~~CCPA ~~and~~gives weCalifornia ~~have~~residents ~~experienced~~expanded ~~cybersecurity~~rights ~~attacks~~to ~~that~~access ~~have~~and ~~resulted~~require indeletion ~~threat~~of ~~actors~~certain ~~obtaining~~of ~~customer~~their personal information, ~~attempts~~opt toout ~~breach~~of ~~our~~certain ~~systems,~~personal ~~fraudulent~~information ~~activity~~sharing, and ~~other~~receive ~~similar~~detailed ~~incidents,~~information ~~and~~about ~~some~~how oftheir ~~these~~personal ~~events~~information ~~have~~is ~~caused~~used. usThe toCCPA ~~incur~~provides ~~losses,~~for ~~including~~civil ~~regulatory~~ penalties for violations, ~~and~~as ~~expend~~well ~~resources~~as toa ~~modify~~private ~~our~~right ~~systems.~~of Weaction ~~expect~~for tocertain ~~continue~~data tobreaches, ~~expend~~which ~~resources~~is expected to ~~address~~increase ~~past~~the ~~incidents~~volume and ~~future~~success ~~incidents~~of ifclass ~~they~~action ~~occur~~data breach litigation. In addition, weto ~~utilize~~increasing ~~vendors~~our (compliance costs and potential liability, the CCPA’s restrictions on “sales” of personal information restrict our ~~vendors~~use ~~utilize~~of ~~vendors)~~cookies and similar technologies for advertising purposes. The CCPA excludes information covered by Gramm-Leach-Bliley Act, ~~some~~the Driver’s Privacy Protection Act or the California Financial Information Privacy Act from the CCPA’s scope, but the CCPA’s definition of ~~which~~“personal ~~have~~information” ~~also~~is ~~experienced~~broad ~~cybersecurity~~and ~~breaches.~~may encompass other information that we maintain.

~~Future~~The ~~threats~~requirements ~~could~~of ~~cause~~the ~~harm~~CCPA expanded substantially in January 2023 as a result of California voters approving the CPRA in November 2020. The CPRA, effective January 1, 2023, gives California residents the ability to: ~~our~~limit ~~business~~use of precise geolocation information and ~~our~~other ~~reputation~~categories of information classified as “sensitive”; add e-mail addresses and ~~challenge~~passwords ~~our~~to ~~ability~~the list of personal information that, if lost or breached, would entitle affected individuals to ~~provide~~bring ~~reliable~~private ~~service~~lawsuits; and establish the California Privacy Protection Agency to implement and enforce the new law, as well as ~~negatively~~impose ~~impact~~administrative ~~our~~fines. ~~results~~The effects of ~~operations~~the ~~materially.~~CCPA, ~~Our~~the ~~insurance~~CPRA, ~~coverage~~and ~~may~~other ~~not~~similar bestate ~~adequate~~or tofederal ~~cover~~laws, ~~all~~are ~~the~~significant ~~costs~~and ~~related~~may require us to ~~cybersecurity~~further ~~attacks~~modify orour ~~disruptions~~data ~~resulting~~processing ~~from~~practices ~~such~~and ~~events~~policies, incur substantial compliance costs and subject us to increased potential liability.

~~Operating~~Some ~~our~~observers ~~business~~have ~~and~~noted ~~products~~that ~~involves~~ the ~~collection,~~CCPA ~~storage, use~~ and ~~transmission~~the ofCPRA ~~sensitive,~~could ~~proprietary~~mark ~~and~~the ~~confidential~~beginning ~~information,~~of ~~including~~a ~~personal~~trend ~~information,~~toward ~~pertaining~~more tostringent ~~our~~privacy ~~current,~~legislation ~~prospective~~in ~~and~~the ~~past customers, employees, contractors, and business partners~~U.S. ~~The~~There ~~security~~is ~~measures~~also wediscussion ~~take~~in toCongress ~~protect this information may be compromised as a result~~ of ~~computer~~new ~~malware,~~comprehensive ~~viruses,~~federal ~~social~~data ~~engineering,~~protection ~~ransomware~~and ~~attacks,~~privacy ~~credential~~laws ~~stuffing~~to ~~attacks,~~which ~~hacking~~we ~~and~~likely ~~cyberattacks,~~would ~~including~~be bysubject ~~state-sponsored~~if ~~and other sophisticated organizations~~enacted. ~~Such~~Until ~~incidents~~an ~~have~~overarching ~~become~~federal ~~more~~privacy ~~prevalent~~law inis ~~recent years. For example~~passed, ~~attempts to fraudulently induce our personnel into disclosing usernames~~however, ~~passwords~~it oris ~~other~~anticipated ~~information~~ that ~~can~~individual bestates ~~used~~will continue to ~~access~~adopt ~~our~~or ~~systems~~amend ~~and~~state ~~the~~laws ~~information in them have increased~~ and ~~could~~regulations begoverning ~~successful. Cybersecurity incidents can also result from malfeasance of our personnel, theft, errors,~~ data ~~leaks,~~privacy and ~~security vulnerabilities or bugs in our website~~cybersecurity, ~~mobile apps or the software or systems on~~ which wewill ~~rely.~~increase ~~Cybersecurity incidents have in~~ the ~~past~~cost ~~resulted~~and incomplexity ~~unauthorized~~of ~~access~~our tocompliance ~~certain~~efforts ~~personal information that we handle,~~ and ~~may~~impact in the ~~future~~integrity ~~result~~and inquality ~~unauthorized, unlawful or inappropriate use, destruction or disclosure~~ of, ~~access~~our ~~to,~~pricing ~~or inability to access the sensitive, proprietary~~ and ~~confidential~~underwriting ~~information that we handle~~processes. ~~These incidents may remain undetected for extended periods of time.~~

WeAdditionally, ~~rely~~in onresponse ~~third~~to ~~parties~~the togrowing ~~provide~~threat ~~critical~~of ~~services~~cyberattacks ~~that~~in ~~help~~the usinsurance ~~deliver~~industry, ~~our~~certain ~~solutions~~jurisdictions ~~and~~have ~~operate~~begun ~~our~~to ~~business~~impose new cybersecurity laws and regulations. ~~These~~On ~~third~~October ~~parties~~24, ~~may~~2017, ~~support~~the orNAIC ~~operate~~adopted ~~critical~~its ~~business~~Insurance ~~systems~~Data Security Model Law, intended to serve as model legislation for usstates orto ~~store~~enact orin ~~process~~order ~~the~~to ~~same~~govern ~~sensitive~~cybersecurity and data protection practices of insurers, ~~proprietary~~insurance agents, and ~~confidential~~other ~~information~~licensed ~~that~~entities weregistered ~~handle~~under state insurance laws. ~~They~~At ~~may~~least ~~not~~26 states have ~~adequate~~adopted ~~security~~the ~~measures~~same ~~and~~or ~~could~~substantially ~~experience~~similar versions of the Insurance Data Security Model Law, each with a ~~cybersecurity~~different ~~incident~~effective ~~that~~date, ~~compromises~~and other states may adopt versions of the ~~confidentiality~~Insurance Data Security Model Law in the future. Also in 2017, ~~integrity~~the orNew ~~availability~~York State Department of ~~the~~Financial ~~systems~~Services ~~they~~adopted ~~operate~~regulations providing minimum standards for usinsurance orcompanies’ cybersecurity programs, requiring an annual certification confirming compliance. In May 2018, South Carolina passed a cybersecurity bill requiring, among other things, any insurance entity operating in the ~~information~~state ~~they~~to ~~process~~establish onand ~~our~~implement ~~behalf~~a cybersecurity program protecting their business and their customers from a data breach, to investigate data breaches and to notify regulators of a cybersecurity event. Some ofjurisdictions, ~~our~~such ~~vendors~~as Connecticut, Massachusetts, Nevada, Maryland, Virginia and California have ~~experienced~~enacted ~~cybersecurity~~more ~~breaches~~generalized data security laws that apply to certain data that we possess. ~~Such~~Additionally, ~~past~~some orof ~~future~~the ~~occurrences~~enacted ~~could~~regulations ~~adversely~~have ~~affect~~since ~~our~~been ~~business~~amended to expand and strengthen established cybersecurity requirements in response to the ~~same~~evolving ~~degree~~cybersecurity aslandscape. ifAlthough we ~~had~~take ~~experienced~~steps ~~these~~to ~~occurrences~~comply ~~directly~~with applicable cybersecurity regulations and wedata ~~may~~security ~~not~~laws, ~~have~~our ~~recourse~~failure to ~~the~~comply ~~responsible~~with ~~third~~new ~~parties~~or ~~for~~existing ~~any~~cybersecurity ~~resulting~~regulations ~~liability~~could ~~that~~result wein ~~incur~~material legal and/or regulatory actions and other penalties and/or damages. In addition, efforts to comply with new or existing cybersecurity regulations could impose significant costs on our business, which could materially and adversely affect our business, results of operations, financial condition or prospects.

~~There~~Further, we are ~~many~~subject ~~different~~to ~~cybercrime~~the ~~and~~terms ~~hacking~~of ~~techniques~~our ~~and~~privacy ~~such~~policies, ~~techniques~~privacy-related ~~continue to evolve~~disclosures, and wecontractual ~~may~~and beother ~~unable~~privacy-related toobligations ~~anticipate attempted security breaches, react~~ to ~~cybersecurity~~our ~~incidents~~customers inand aother ~~timely~~third ~~manner or implement adequate preventative measures~~parties. ~~While~~We we have ~~developed~~in ~~systems~~the ~~and~~past ~~processes~~experienced ~~designed~~cybersecurity toattacks ~~protect~~that ~~the~~have ~~integrity,~~resulted ~~confidentiality~~in ~~and~~threat ~~security~~actors ofobtaining ~~the~~customer ~~confidential and~~ personal information ~~under~~and ~~our~~some ~~control,~~of wethese ~~cannot assure you that any security measures that we or our third-party service providers have implemented will be effective against current or future security threats.~~

A security breach or other cybersecurity incident, or the perception that one has occurred, could result in a loss of customer confidence in the security of our platform and damage our reputation and brand; reduce demand for our insurance products; disrupt normal business operations; require us to expend significant capital and resources to investigate and remedy the incident and prevent recurrence; and subject us to litigation, regulatory enforcement action, fines, penalties, and other liability, which could have a material adverse effect on our business, financial

~~condition~~events ~~and~~have ~~results~~caused ofus ~~operations.~~to ~~Even~~incur iflosses, weincluding ~~take~~regulatory ~~steps~~penalties, ~~that~~costs weand ~~believe~~expend ~~are~~resources ~~adequate~~ to ~~protect~~modify usour ~~from~~systems. ~~cyber~~Any ~~threats,~~failure ~~hacking~~or ~~against~~perceived ~~our~~failure ~~competitors~~by us or ~~other~~third ~~companies~~parties inwe ~~our~~work ~~industry~~with ~~could~~to ~~create~~comply ~~the~~with ~~perception~~privacy ~~among~~policies, ~~our~~disclosures, ~~customers~~and orobligations ~~potential~~to customers ~~that~~or ~~our~~other ~~digital~~third ~~platform~~parties, isor ~~not~~privacy ~~safe~~or todata ~~use.~~security ~~Security~~laws ~~incidents~~may ~~could~~result ~~also~~in ~~damage~~governmental ~~our~~or ITregulatory ~~systems~~investigations, ~~and~~enforcement ~~our~~actions, ~~ability~~regulatory tofines, ~~make~~criminal ~~the~~compliance ~~financial~~orders, ~~reports~~private ~~and~~litigation ~~other~~or public ~~disclosures~~statements ~~required~~against ofus ~~public~~by ~~companies.~~consumer ~~These~~advocacy ~~risks~~groups ~~are~~or ~~likely~~others, toand ~~increase~~could ascause wecustomers ~~continue~~ to ~~grow~~lose ~~and~~trust ~~process~~in us, ~~store~~any of which could materially and ~~transmit~~adversely anaffect ~~increasingly~~on ~~large~~our ~~volume~~business, results of ~~data~~operations, financial condition and prospects.

WeCybersecurity ~~cannot be certain that our insurance coverage will be adequate for cybersecurity liabilities~~incidents, ~~will~~or ~~continue~~real ~~to be available to us on economically reasonable terms,~~ or atperceived ~~all~~errors, orfailures ~~that any insurer will not deny coverage as to any future claim. The successful assertion of one~~ or ~~more~~bugs ~~large~~in ~~claims~~our ~~against us that exceed available insurance coverage,~~ or ~~the occurrence of changes in~~ our ~~insurance~~vendors’ ~~policies,~~systems ~~including premium increases~~ or ~~the~~our ~~imposition~~website ~~of large deductible~~ or ~~co-insurance~~app ~~requirements,~~ could ~~adversely~~impair ~~affect~~ our ~~reputation, business, financial condition and results of~~ operations~~. In some cases~~, ~~particularly~~compromise ~~in the case of websites or mobile apps operating outside of the United States,~~ our ~~available~~confidential ~~remedies~~information ~~may not be adequate to protect us against the effect of the operation of such websites~~ or ~~mobile apps. Regardless of whether we can successfully enforce~~ our ~~rights~~customers’ ~~against~~personal ~~the operators of these websites or mobile apps~~information, ~~any~~damage ~~measures~~our ~~that~~reputation weand ~~may take could require us to expend significant financial or other resources~~brand, ~~which~~and ~~could~~ harm our business, ~~results of operations or~~ financial condition~~. In addition~~, tooperating ~~the~~results ~~extent that such activity creates confusion among consumers or advertisers, our brand~~ and ~~business could be harmed~~prospects.

Our ~~brand~~success depends on our systems, applications, and software continuing to operate and to meet the changing needs of our customers and users. We rely on our technology and engineering staff and vendors to successfully implement changes to and maintain our systems and services in an efficient and secure manner. Like all information systems and technology, our website and mobile app, systems and environment and those of our service providers and business partners have in the past experienced and may ~~not~~contain ~~become~~or asdevelop ~~widely~~material ~~known~~errors, failures, vulnerabilities or ~~accepted~~bugs, particularly when new features or capabilities are released, and are subject to fraud, malicious code, phishing attacks or other social engineering attempts, system intrusion, exfiltration, theft, web application attacks, attempts to overload our servers with denial-of-service or other attacks, ransomware and similar incidents or disruptions from unauthorized use of our computer systems, as ~~incumbents’~~well ~~brands~~as unintentional incidents causing data leakage, any of which could lead to interruptions, delays or website or mobile app slowdowns or shutdowns. Third parties could misappropriate our data through website scraping, bots or other means and aggregate this data on their websites with data from other companies. Many of our services are provided through the ~~brand~~Internet which increases our exposure to potential cybersecurity attacks. In addition, we utilize a workforce that is largely remote and may ~~become~~exacerbate ~~tarnished~~exposure to cybersecurity incidents.

~~Many~~We ~~of our competitors~~ have ~~brands~~experienced ~~that~~cybersecurity ~~are~~threats ~~well-recognized.~~to Asour ainformation ~~newer~~technology ~~entrant~~infrastructure ~~into~~and ~~the insurance market,~~ we have ~~spent,~~experienced ~~and~~cybersecurity ~~expect~~incidents that wehave ~~will~~resulted ~~for~~in ~~the~~threat ~~foreseeable~~actors ~~future~~obtaining ~~continue~~customer topersonal ~~spend~~information, ~~considerable~~attempts ~~amounts of money and other resources on creating brand awareness and building our reputation. We may not be able~~ to ~~build~~breach ~~brand awareness to levels matching~~ our ~~competitors~~systems, ~~and~~fraudulent ~~our~~activity ~~efforts~~and atother ~~building~~incidents, ~~maintaining~~ and ~~enhancing~~some ~~our~~of ~~reputation~~these ~~could~~events ~~fail~~have ~~and/or~~caused ~~may~~us ~~not~~to beincur ~~cost-effective. Complaints or negative publicity about our business practices~~losses, ~~our marketing and advertising campaigns (~~including ~~marketing~~regulatory ~~affiliations or partnerships)~~penalties, ~~our~~costs ~~compliance with applicable laws~~ and ~~regulations,~~expend ~~the~~resources ~~integrity~~to ofmodify ~~the~~our ~~data~~systems. ~~that~~We wecontinue ~~provide~~ to ~~consumers~~expend orresources ~~business~~to ~~partners,~~address ~~data~~past ~~privacy~~incidents and ~~security~~would ~~issues,~~expend ~~and~~resources ~~other aspects of our business, whether real or perceived, could diminish confidence~~ in ~~our~~the ~~brand,~~future ~~which~~to ~~could~~respond ~~adversely~~to ~~affect~~incidents ~~our~~if ~~reputation~~they ~~and~~again ~~business~~occur. AsIn ~~we expand our product offerings and enter new markets~~addition, we ~~will~~utilize ~~need~~vendors to(and ~~establish~~ our ~~reputation~~vendors ~~with~~utilize ~~new customers~~vendors), ~~and~~some toof ~~the~~which ~~extent~~have wealso ~~are~~experienced ~~not~~cybersecurity ~~successful~~breaches inand ~~creating~~other ~~positive impressions, our business in these newer markets could be adversely affected~~incidents. ~~While~~Publicized ~~we may choose to engage in a broader marketing campaign to further promote our brand~~threats, ~~this~~incidents ~~effort may not be successful~~ or ~~cost~~events ~~effective.~~could Ifcause weharm ~~are unable~~ to ~~maintain~~our orbusiness ~~enhance~~and our reputation orand ~~enhance~~challenge ~~consumer~~our ~~awareness~~ability ofto ~~our~~provide ~~brand~~reliable inservice, aas ~~cost-effective~~well ~~manner,~~as ~~our~~negatively ~~business,~~impact our results of operations ~~and financial condition could be~~ materially ~~adversely affected~~.

WeIn ~~rely~~addition, oncopycat ~~highly~~websites ~~skilled~~or mobile apps have in the past and ~~experienced~~may ~~personnel~~again attempt to misappropriate data and ifattempt to imitate our brand or the functionality of our website or our mobile app. When we ~~are~~become ~~unable~~aware toof ~~attract~~such websites or mobile apps, ~~retain~~we have employed technological or ~~motivate~~legal ~~key~~measures ~~personnel~~in an attempt to halt their operations and intend to do so in the future. However, we may be unable to detect all such websites or ~~hire~~mobile ~~qualified~~apps ~~personnel~~in a timely manner and, ~~our~~even ~~business~~if we could, technological and legal measures may be ~~seriously~~insufficient ~~harmed~~to halt their operations. Regardless Inof ~~addition,~~whether we can successfully enforce our rights against the ~~loss~~operators of ~~key~~these ~~senior~~websites ~~management~~or ~~personnel~~mobile apps, any measures that we may take could require us to expend significant financial or other resources, which could harm our business, ~~and~~results ~~future~~of operations, financial condition or prospects. In addition, to the extent that such activity creates confusion among consumers or advertisers, our brand and business would be harmed.

~~Our~~Operating ~~performance~~our ~~largely~~business ~~depends on the talents~~ and ~~efforts~~products ofinvolves ~~highly~~the ~~skilled individuals. Our future success depends on our continuing ability to identify~~collection, ~~hire~~storage, ~~develop,~~use ~~motivate~~ and ~~retain~~transmission ~~highly~~of ~~skilled and experienced personnel and~~sensitive, ifproprietary ~~we are unable to hire~~ and ~~train~~confidential ainformation, ~~sufficient~~including ~~number~~personal ~~of qualified employees for any reason~~information, wepertaining ~~may not be able~~ to ~~maintain or implement~~ our current ~~initiatives~~, orprospective ~~our business may contract~~ and ~~we may lose market share. We have implemented involuntary workforce reductions in the~~ past customers, ~~which may have harmed our reputation and relationship with our~~ employees, ~~and may make it more difficult for us to recruit top talent~~contractors, and ~~we may implement workforce reductions in the future to support other~~ business ~~objectives~~partners. WeThe ~~have~~security ~~experienced~~measures ~~the~~we ~~effects~~take ofto ~~the~~protect ~~current~~this ~~competitive~~information ~~labor market and our workforce reductions and~~ have ~~responded~~been ~~by increasing wages~~ and~~/or~~ ~~benefits~~may inagain ~~certain~~be ~~circumstances~~compromised ~~and~~as ~~provided~~a ~~cash~~result ~~and~~of ~~equity~~computer tomalware, ~~certain~~viruses, ~~employees~~social inengineering, ~~order~~ransomware toattacks, ~~attract~~credential ~~and~~stuffing ~~retain them~~attacks, ~~all~~hacking ofand ~~which may continue to negatively impact our results of operations. Moreover~~cyberattacks, ~~certain~~including ofby ~~our~~state-sponsored ~~competitors~~and or other ~~insurance~~sophisticated ororganizations, ~~technology businesses may seek to hire our employees. We cannot assure you that our cash~~ and ~~equity incentives and~~ other ~~compensation~~cybersecurity ~~and~~incidents. ~~benefits~~Such ~~will~~incidents ~~provide~~have ~~adequate~~become ~~incentives~~more toprevalent ~~attract,~~in ~~retain~~recent ~~and~~years. ~~motivate~~For ~~employees in the future~~example, ~~particularly~~attempts ifto ~~the~~fraudulently ~~market~~induce ~~price of~~ our ~~Class~~personnel Ainto ~~common~~disclosing ~~stock~~usernames, ~~does~~passwords ~~not increase~~ or other

~~declines~~information ~~further~~that can be used to access our systems and the information in them have increased. IfCybersecurity weincidents docan ~~not~~also ~~succeed~~result from malfeasance of our personnel, theft, errors, data leaks, and security vulnerabilities or bugs in ~~attracting~~our website, ~~retaining~~mobile app or the software or systems on which we rely. Cybersecurity incidents have in the past resulted in unauthorized access to certain personal information that we handle, and ~~motivating~~may ~~highly~~again ~~qualified~~in ~~personnel~~the future result in unauthorized, ~~our~~unlawful ~~business~~or inappropriate use, destruction or disclosure of, access to, or inability to access the sensitive, proprietary and confidential information that we handle. These incidents may beremain ~~seriously~~undetected ~~harmed~~for extended periods of time.

We ~~depend~~rely on ~~our~~third ~~senior~~parties ~~management,~~to ~~including~~provide ~~Alexander~~critical ~~Timm,~~services that help us deliver our ~~Chief~~solutions ~~Executive~~and ~~Officer.~~operate Weour ~~have~~business. ~~experienced~~These ~~turnover~~third ~~among~~parties ~~our~~support ~~senior~~or ~~management~~operate ~~and~~critical ~~employees.~~business Wesystems ~~may~~for ~~not~~us beor ~~able~~store toor ~~retain~~process the ~~services~~same ofsensitive, ~~any~~proprietary ofand ~~our~~confidential ~~senior~~information ~~management~~that orwe ~~other~~handle. ~~key~~They ~~personnel,~~may asnot ~~their~~have ~~employment~~adequate issecurity ~~at-will~~measures and ~~they~~ could ~~leave~~experience ata ~~any~~cybersecurity ~~time.~~incident Ifthat wecompromises ~~lose~~ the ~~services~~confidentiality, ofintegrity ~~one~~ or ~~more~~availability of ~~our~~the ~~senior~~systems ~~management~~they ~~and~~operate ~~other~~for ~~key~~us ~~personnel,~~or ~~including~~the asinformation athey ~~result~~process ofon our ~~workforce~~behalf. ~~reductions~~Some orof our ~~business~~vendors ~~results,~~have weexperienced ~~may~~cybersecurity ~~not~~breaches beand ~~able~~other toincidents. ~~successfully~~Such ~~manage~~past ~~our~~or ~~business,~~future ~~meet~~occurrences ~~competitive~~could ~~challenges~~adversely oraffect ~~achieve~~ our business ~~objectives. Further,~~ to the ~~extent~~same ~~that~~degree ~~our~~as ~~business~~if ~~grows,~~ we ~~will~~had ~~need~~experienced tothese ~~attract~~occurrences ~~and~~directly ~~retain additional qualified management personnel in a timely manner,~~ and we may not behave ~~able~~recourse to dothe ~~so.~~responsible ~~Our~~third ~~future~~parties ~~success~~for ~~depends~~any onresulting ~~our~~liability ~~continuing~~that ~~ability~~we ~~to identify, hire, develop, motivate, retain and integrate highly skilled personnel in all areas of our organization~~incur.

~~New~~There ~~legislation~~are ormany ~~legal~~different ~~requirements~~cybercrime ~~may~~and ~~affect~~hacking ~~how~~techniques, such techniques continue to evolve, and we ~~communicate~~may ~~with~~be ~~our~~unable ~~customers~~to anticipate security breaches or incidents, ~~which~~react ~~could~~to cybersecurity incidents in a timely manner, implement adequate preventative measures or completely mitigate the effects of any such attack or incidents. While we have andeveloped ~~adverse~~systems ~~effect~~and onprocesses ~~our~~designed ~~business~~to ~~model,~~protect ~~financial~~the ~~condition~~integrity, confidentiality and ~~results~~security of ~~operations~~the confidential and personal information under our control, we cannot guarantee that any security measures we or our third-party business partners have implemented will be effective against all current or future security threats.

~~State~~A ~~and~~security ~~federal~~breach ~~lawmakers~~or ~~and~~other ~~insurance~~cybersecurity ~~regulators~~incident, ~~are~~or ~~focusing on~~ the ~~use~~perception ofthat ~~artificial~~one ~~intelligence~~has ~~broadly~~occurred, ~~including,~~could result in ~~particular,~~a ~~concerns~~loss ~~about~~of ~~transparency,~~customer ~~deception,~~confidence ~~and~~in ~~fairness.~~the ~~For~~security ~~instance,~~of onour ~~August~~platform ~~24,~~and ~~2020,~~damage ~~the~~our ~~NAIC~~reputation ~~adopted~~and ~~guiding~~brand; ~~principles~~reduce ondemand ~~artificial~~for ~~intelligence~~our ~~developed~~insurance byproducts; ~~the~~disrupt ~~NAIC’s~~normal AIbusiness ~~Working~~operations; ~~Group~~require us to ~~provide~~expend ~~guidance~~significant resources to ~~regulators~~investigate onand remedy the ~~use~~incident ofand ~~artificial~~prevent ~~intelligence~~recurrence; inand ~~the~~subject ~~insurance~~us ~~industry~~to litigation, ~~and~~regulatory onenforcement ~~December~~action, 4fines, ~~2023~~costs, ~~the~~penalties, ~~NAIC~~and ~~issued~~other liability, which could have a ~~model~~material ~~bulletin~~adverse effect on ~~artificial~~our ~~intelligence~~business, ~~Use~~results of ~~Artificial~~operations, ~~Intelligence~~financial ~~Systems~~condition byand ~~Insurers~~prospects. Even if we take steps that we believe are adequate to protect us from cybersecurity threats, ~~which~~hacking against our competitors or other companies in our industry could create the perception among our customers or potential customers that our digital platform is ~~intended~~not safe to beuse. ~~used~~Security byincidents ~~state~~could ~~departments~~also ofdamage ~~insurance~~our IT systems and our ability to ~~set~~make ~~forth~~the ~~regulatory~~financial ~~expectations~~reports asand other public disclosures required of public companies. These risks are likely to ~~how~~increase ~~insurers~~as ~~should~~we ~~govern~~continue ~~the~~to ~~development,~~grow ~~acquisition~~and process, store and ~~use~~transmit ofan ~~artificial~~increasingly ~~intelligence~~large volume of data.

InOur ~~addition,~~insurance ~~legislation~~coverage ~~regulating~~may ~~the~~not ~~use~~be ofadequate ~~artificial~~to ~~intelligence~~cover ~~has~~all ~~been~~cybersecurity ~~enacted~~liabilities, inincluding ~~several states and has been proposed on~~ the ~~federal~~costs, ~~level.~~fines ~~Changes in laws~~ and/or ~~regulations,~~damages orrelated ~~changes~~to incybersecurity ~~the~~attacks, ~~interpretation~~associated ofprivacy ~~laws~~litigation or ~~regulations by a~~ regulatory ~~authority~~actions, ~~specific~~or todisruptions ~~the~~resulting ~~use~~from ofsuch ~~artificial~~events. ~~intelligence~~In addition, ~~may~~we ~~decrease~~cannot ~~our~~be ~~revenues~~certain ~~and~~that ~~earnings~~insurance ~~and~~coverage ~~may~~will ~~require~~continue us to ~~change the manner in which we conduct some aspects of our business. We may also~~ be ~~required~~available to ~~disclose~~us ~~our~~on ~~proprietary~~economically ~~software~~reasonable ~~to regulators~~terms, ~~putting~~or ~~our~~at ~~intellectual~~all, ~~property~~or atthat ~~risk,~~any ininsurer ~~order~~will tonot ~~receive~~deny ~~regulatory~~coverage ~~approval~~as to ~~use~~any ~~such~~future ~~artificial~~claim. ~~intelligence~~The insuccessful ~~the~~assertion ~~underwriting~~ of ~~insurance~~one ~~and/~~or ~~the~~more ~~payment~~large of claims. Inagainst ~~addition,~~us ~~our~~that ~~business~~exceed ~~and~~available ~~operations~~insurance ~~are subject to various U.S. federal~~coverage, ~~state,~~or ~~and~~changes ~~local~~in ~~consumer~~our ~~protection~~insurance ~~laws~~policies, including ~~laws~~premium ~~which~~increases ~~place~~or ~~restrictions on~~ the ~~use~~imposition of ~~automated~~large ~~tools~~deductible ~~and technologies to communicate with wireless telephone subscribers~~ or ~~consumers~~co-insurance ~~generally. For example~~requirements, ~~California’s~~could ~~Bolstering~~adversely ~~Online~~affect ~~Transparency~~our ~~Act~~reputation, ~~effective~~business, asresults of ~~July 2019~~operations, ~~makes~~financial itcondition ~~unlawful~~and ~~for~~prospects. ~~any~~In ~~person~~some tocases, ~~use~~particularly ain ~~bot~~the tocase ~~communicate~~of ~~with~~websites aor ~~person~~mobile inapps ~~California~~operating ~~online~~outside ~~with~~of the ~~intent~~U.S., toour ~~mislead~~available ~~the~~remedies ~~other~~may ~~person~~not ~~about~~be ~~the~~adequate ~~bot’s~~to ~~artificial~~protect ~~identity~~us ~~for~~against the ~~purpose~~effect of ~~knowingly deceiving~~ the ~~person~~operation ~~about the content~~ of ~~the~~such ~~communication~~websites inor ~~order~~mobile toapps. ~~incentivize~~Regardless ~~a purchase~~ of ~~goods~~whether ~~or services in a commercial transaction. Although~~ we ~~have~~can ~~taken~~successfully ~~steps~~enforce ~~to mitigate~~ our ~~liability~~rights ~~for~~against ~~violations of this and other laws restricting~~ the ~~use~~operators of ~~electronic~~these ~~communication~~websites ~~tools,~~or nomobile ~~assurances~~apps, ~~can~~any bemeasures ~~given~~ that we ~~will~~may ~~not~~take becould ~~exposed~~require tous ~~civil litigation or regulatory enforcement. Further,~~ to ~~the~~expend ~~extent~~significant ~~that~~financial ~~any changes in law~~ or ~~regulation~~other ~~further~~resources ~~restrict~~and ~~the~~harm ~~ways~~our ~~in which we communicate with prospective or current customers before or during onboarding~~business, ~~customer~~results ~~care,~~of ~~or claims management~~operations, ~~these~~financial ~~restrictions~~condition ~~could~~and ~~result~~prospects. inIn aaddition, ~~material~~to ~~reduction~~the inextent ~~our~~that ~~customer~~such ~~acquisition~~activity ~~and~~creates ~~retention,~~confusion ~~reducing~~among ~~the~~consumers ~~growth~~or ~~prospects of our business~~advertisers, ~~and adversely affecting~~ our ~~financial~~brand ~~condition~~ and ~~future~~business ~~cash~~would ~~flows~~be harmed.

~~Denial~~Our ofbrand ~~claims~~may ornot ~~our~~become ~~failure~~as towidely ~~accurately~~known ~~and~~or ~~timely~~accepted ~~pay~~as ~~claims~~incumbents’ ~~could~~brands ~~materially~~or ~~and~~the ~~adversely~~brand ~~affect~~may ~~our~~become ~~business, financial condition, results of operations, and prospects~~tarnished.

~~Under~~Many ~~the terms~~ of our ~~policies,~~competitors wehave ~~are~~brands ~~required~~that toare ~~accurately and timely evaluate and pay claims~~well-recognized. ~~Our~~As ~~ability to do so depends on~~ a ~~number~~newer ofentrant ~~factors,~~into ~~including~~ the ~~efficacy~~insurance ofmarket, ~~our~~we ~~claims~~have ~~processing~~spent, ~~the training~~ and ~~experience~~expect ofthat ~~our~~we ~~claims~~will ~~adjusters,~~for ~~including~~the ~~our~~foreseeable ~~third-party~~future ~~claims~~continue ~~administrators, and our ability~~ to ~~develop~~spend, orconsiderable ~~select~~amounts ~~and~~of ~~implement~~money ~~appropriate procedures~~ and ~~systems to support our claims functions.~~

~~marketplace~~other resources on creating brand awareness and building our reputation. IfWe may not be able to build brand awareness to levels matching our ~~claims~~competitors, ~~adjusters~~and our efforts at building, maintaining and enhancing our reputation could fail and/or ~~third~~may not be cost-~~party~~effective. ~~claims~~Complaints ~~administrators~~or ~~are~~negative ~~unable~~publicity toabout ~~effectively~~our ~~process~~business practices, our ~~volume~~marketing ofand ~~claims~~advertising campaigns (including marketing affiliations or partnerships), our ~~ability~~compliance with applicable laws and regulations, the integrity of the data that we provide to ~~grow~~consumers ~~our~~or business ~~while~~partners, ~~maintaining~~data ~~high~~privacy ~~levels~~and security issues, and other aspects of ~~customer~~our ~~satisfaction~~business, ~~could~~whether bereal ~~compromised~~or perceived, ~~which~~could diminish confidence in ~~turn~~our brand, ~~could~~which would adversely affect our ~~operating~~reputation ~~margins~~and business. ~~Any~~As ~~failure~~we toexpand ~~pay~~our ~~claims~~product ~~accurately~~offerings orand ~~timely~~enter ~~could~~new ~~also~~markets, ~~lead~~we will need to ~~regulatory~~establish our reputation with new customers, and ~~administrative~~to ~~actions~~the orextent ~~other~~we ~~legal~~are ~~proceedings~~not ~~and~~successful ~~litigation~~in ~~against~~creating uspositive impressions, orour ~~result~~business in ~~damage~~these newer markets could be adversely affected. We may choose to engage in a broader marketing campaign to further promote our ~~reputation~~brand, ~~any~~this ~~one~~effort ofmay ~~which~~not ~~could~~be ~~materially~~successful ~~and~~or ~~adversely~~cost ~~affect~~effective. If we are unable to maintain or enhance our ~~business~~reputation or enhance consumer awareness of our brand in a cost-effective manner, ~~financial~~our ~~condition~~business, results of operations, financial condition and prospects would be materially adversely affected.

~~Unexpected~~We ~~increases~~rely inon ~~the~~highly ~~frequency~~skilled orand ~~severity~~experienced ofpersonnel ~~claims~~and if we are unable to attract, asretain ~~well~~or asmotivate ~~increasing~~key ~~costs~~personnel ofor ~~social~~hire ~~inflation~~qualified personnel, our business may ~~adversely~~be ~~affect~~seriously harmed. In addition, the loss of key senior management personnel could harm our business, results of operations, ~~and~~ financial condition and prospects.

Our success depends on the talents and efforts of highly skilled individuals. Our future success depends on our continuing to identify, hire, develop, motivate and retain highly skilled and experienced personnel and, if we are unable to hire and train a sufficient number of qualified employees for any reason, we may not be able to maintain or implement our current initiatives, or our business may ~~experience~~contract ~~volatility~~and we may lose market share. We have implemented involuntary workforce reductions in ~~claim~~the ~~frequency~~past, ~~from~~which ~~time~~may have harmed our reputation and relationship with our employees and may make it more difficult for us to ~~time~~recruit top talent, and ~~short-term~~we ~~trends~~ may ~~not~~implement ~~continue~~workforce ~~over~~reductions in the ~~longer~~future ~~term~~to support other business objectives. ~~Changes~~We have experienced the effects of a competitive labor market and prior workforce reductions and have responded by increasing wages and/or benefits in ~~claim~~certain ~~frequency~~circumstances ~~may~~and ~~result~~provided ~~from~~cash ~~changes~~and equity to certain employees in ~~mix~~order to attract and retain them, all of which may continue to negatively impact our business, ~~miles~~results ~~driven~~of operations, ~~distracted~~financial ~~driving,~~condition ~~weather,~~and ~~pandemics~~prospects. Moreover, ~~macroeconomic~~certain of our competitors or other ~~factors~~insurance or technology businesses may seek to hire our employees. AWe ~~significant~~cannot ~~increase~~guarantee that our cash and equity incentives and other compensation and benefits will provide adequate incentives to attract, retain and motivate employees in ~~claim~~the ~~frequency~~future, ~~could~~particularly ~~have~~if anthe ~~adverse~~market ~~effect~~price onof our ~~results~~Class ofA ~~operations~~common stock declines or remains challenged. If we do not succeed in attracting, retaining and ~~financial~~motivating ~~condition~~highly qualified personnel, our business may be seriously harmed.

~~Changes~~We independ ~~bodily~~on ~~injury~~our ~~claim~~senior ~~severity~~management, ~~are~~including ~~impacted~~Alexander byTimm, ~~inflation~~our inChief ~~medical~~Executive ~~costs,~~Officer. ~~litigation~~We ~~trends~~have experienced turnover among our senior management and ~~precedents~~employees. We may not be able to retain the services of any of our senior management or other key personnel, ~~regulation~~as their employment is at-will, and they could leave at any time. If we lose the ~~overall~~services ~~safety~~of one or more of ~~automobile~~our ~~travel.~~senior ~~Changes~~management inor ~~auto~~other ~~property~~key ~~damage~~personnel, ~~claim~~including ~~severity~~as ~~are~~a ~~driven~~result ~~primarily~~of byour ~~inflation~~workforce inreductions ~~the~~or ~~cost~~our business results, we may not be able to ~~repair~~successfully manage our business, meet competitive challenges or ~~replace~~achieve ~~vehicles~~our business objectives. Further, ~~including~~to ~~parts~~the extent that our business grows, we will need to attract and ~~labor~~retain ~~rates~~additional qualified management personnel in a timely manner, ~~the~~and ~~mix~~we ofmay ~~vehicles~~not ~~that~~be ~~are~~able ~~declared~~to ~~total~~do ~~losses~~so. Our success depends on our continuing to identify, ~~model~~hire, ~~year~~develop, ~~mix~~motivate, asretain ~~well~~and asintegrate ~~used~~highly ~~car~~skilled ~~values~~personnel in all areas of our business.

New legislation or legal requirements may affect how we use artificial intelligence and /or may impact how we communicate with our customers, which could have an adverse effect on our business, financial condition, results of operations and prospects.

We continue to develop and implement applications of artificial intelligence, a term we use broadly to refer to computational systems that learn from data, identify patterns, and generate insights that can automate decision-making. This term is inclusive of classical supervised machine learning, in which models are trained to faithfully mimic patterns observed in data sets. Applications implemented by the Company include but are not limited to our pricing and underwriting models, claims process decisioning and marketing bid models, though in these instances the artificial intelligence deployed is static and deterministic. As with many innovations, artificial intelligence

presents risks and there is no guarantee that our use of artificial intelligence or incorporation of artificial intelligence capabilities into our business will benefit our business.

State and federal lawmakers and insurance regulators are focusing on the use of artificial intelligence broadly, including, in particular, concerns about transparency, deception, and fairness. For instance, on August 24, 2020, the NAIC adopted guiding principles on artificial intelligence developed by the NAIC’s AI Working Group to provide guidance to regulators on the use of artificial intelligence in the insurance industry, and on December 4, 2023, the NAIC issued a model bulletin on artificial intelligence, Use of Artificial Intelligence Systems by Insurers, which is intended to be used by state departments of insurance to set forth regulatory expectations as to how insurers should govern the development, acquisition, and use of artificial intelligence. Subsequently, many state insurance regulators have promulgated that model bulletin through their own departments of insurance, occasionally modifying the model template to highlight state-specific concerns or positions.

In addition, legislation regulating the use of artificial intelligence has been enacted in several states and has been proposed on the federal level. Changes in laws or regulations, or changes in the interpretation of laws or regulations by a regulatory authority, specific to the use of artificial intelligence, may decrease our revenues and earnings and may require us to change the manner in which we conduct some aspects of our business. We may also be required to disclose our proprietary software to regulators, putting our confidential intellectual property at risk, in order to receive regulatory approval to use such artificial intelligence in the underwriting of insurance and/or the payment of claims. In addition, our business and operations are subject to various U.S. federal, state, and local consumer protection laws, including laws which place restrictions on the use of automated tools and technologies to communicate with wireless telephone subscribers or consumers generally. For example, California’s Bolstering Online Transparency Act, effective as of July 2019, makes it unlawful for any person to use a bot to communicate with a person in California online with the intent to mislead the other person about the bot’s artificial identity for the purpose of knowingly deceiving the person about the content of the communication in order to incentivize a purchase of goods or services in a commercial transaction. Although we have taken steps to mitigate our liability for violations of this and other laws restricting the use of electronic communication tools, we cannot guarantee that we will not be exposed to civil litigation or regulatory enforcement for actual or perceived failures in this respect. Further, to the extent that any changes in law or regulation further restrict the ways in which we communicate with prospective or current customers before or during onboarding, customer care, or claims management, these restrictions could result in a material reduction in our customer acquisition and retention, and our business, results of operations, financial condition and prospects would be materially adversely affected.

Denial of claims or our failure to accurately and timely pay claims could materially and adversely affect our business, results of operations, financial condition and prospects.

Under the terms of our policies, we are required to accurately and timely evaluate and pay covered claims. We have settled claims related to allegations that we did not timely or accurately pay claims and have been assessed market conduct fines and penalties by regulatory authorities. Our ability to accurately and timely evaluate and pay claims depends on a number of factors, including the efficacy of our claims processing, the training and experience of our claims adjusters, including our third-party claims administrators, and our ability to develop or select and implement appropriate procedures and systems to support our claims functions.

We believe that the speed at which our technology-based claims processing platform allows us to process and pay claims is a differentiating factor for our business relative to our competitors, and an increase in the average time to process claims could lead to customer dissatisfaction and undermine our reputation and position in the insurance marketplace. If our claims adjusters or third-party claims administrators are unable to effectively process our volume of claims, our ability to grow our business while maintaining high levels of customer satisfaction will be compromised, which in turn, would adversely affect our business, results of operations, financial condition and prospects. Any failure to pay claims accurately or timely could also lead to regulatory and administrative actions or other legal proceedings and litigation against us, or result in damage to our reputation, any one of which could materially and adversely affect our business, results of operations, financial condition and prospects.

Unexpected increases in the frequency or severity of claims, as well as increasing costs of social inflation and the legal environment, may adversely affect our business, results of operations, financial condition and prospects.

Our business experiences volatility in claim frequency from time to time, and short-term trends may not continue over the longer term. Changes in claim frequency may result from changes in mix of business, miles driven, distracted driving, weather, pandemics, macroeconomic or other factors. A significant increase in claim frequency or severity could have an adverse effect on our business, results of operations, financial condition and prospects.

Changes in bodily injury claim severity specifically are impacted by inflation in medical costs, litigation trends and precedents, regulation and the overall safety of automobile travel. Changes in auto property damage claim severity are driven primarily by inflation in the cost to repair or replace vehicles, including parts and labor rates, the mix of vehicles that are declared total losses, model year mix as well as used car values. An increase in tariffs, or implementation of new tariffs, would likely drive an increase in auto property damage claim severity.

In addition, social inflation may materially and adversely affect our financial condition. Social inflation is a term used to describe how insurers’ costs may be increasing at a rate higher than other economic inflation, generally due to trends in increasing litigation costs brought by insureds and claimants seeking larger settlement amounts, as well as the proliferation of litigation-financing firms, the hiring of testifying expert witnesses, and the use of costly, sophisticated technology to aid trial presentations. Considered part of social inflation are nuclear verdicts, which are generally considered to be jury verdicts exceeding $10 million in punitive and compensatory awards and have recently become more common.

While actuarial models for pricing and reserving typically include an expected level of inflation (including social inflation), unanticipated increases in claim severity can arise from events that are inherently difficult to predict such as inflationary shocks or surges in health care costs. Implementation of tariffs could also contribute to claim severity. Although we pursue various loss management initiatives to mitigate future increases in claim severity, ~~there~~we ~~can~~cannot beguarantee ~~no assurances~~ that these initiatives will successfully identify or reduce the effect of future increases in claim severity, and our failure to do so would adversely affect our business, results of operations, financial condition and prospects.

Failure to maintain our risk-based capital at the required levels could adversely affect our ability to maintain regulatory authority to conduct our business.

We are required to ~~have~~maintain sufficient capital and surplus in order to comply with insurance regulatory requirements, support our business operations and minimize our risk of insolvency. The NAIC has developed a system to test the adequacy of statutory capital and surplus of U.S.-based insurers, known as risk-based capital, that all states have adopted. This system establishes the minimum amount of capital and surplus necessary for an insurance company to support its overall business operations in consideration of its size and risk profile. It identifies insurers that may be inadequately capitalized by looking at certain risk factors, including asset risk, credit risk and underwriting risk with respect to the insurer’s business in order to determine an insurer’s authorized control level risk-based capital. An insurer’s risk-based capital ratio measures the relationship between its total adjusted capital and its authorized control level risk-based capital.

Insurers with a ratio falling below certain calculated thresholds may be subject to varying degrees of regulatory action, including heightened supervision, examination, rehabilitation or liquidation. An insurance company with total adjusted capital that is less than 200% of its authorized control level risk-based capital is at a company action level, which would require the insurance company to file a risk-based capital plan that, among other things, contains proposals of corrective actions the Company intends to take that are reasonably expected to result in the elimination of the Company action level event. Additional action level events occur when the insurer’s total adjusted capital falls below 150%, 100% and 70% of its authorized control level risk-based capital. Lower percentages trigger increasingly severe regulatory responses. In the event of a mandatory control level event (triggered when an insurer’s total adjusted capital falls below 70% of its authorized control level risk-based capital), an insurer’s primary regulator is required to take steps to place the insurer into receivership.

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~~insurer’s~~In ~~total~~addition, ~~adjusted~~the ~~capital~~NAIC ~~falls~~Insurance ~~below~~Regulatory ~~70%~~Information System, or IRIS, is a collection of ~~its~~analytical ~~authorized~~tools ~~control~~designed ~~level~~to ~~risk-based~~provide ~~capital),~~state insurance regulators with an ~~insurer’s~~integrated ~~primary~~approach ~~regulator~~to isscreening ~~required~~and analyzing the financial condition of insurance companies operating in their respective states. If our ratios fall outside of the usual range for one or more ratios set forth by the NAIC for any number of reasons, it could subject us to ~~take~~heightened ~~steps~~regulatory scrutiny or measures or create investor uncertainty around the stability of our financial condition, which could harm our business. We previously disclosed to ~~place~~the Ohio DOI that certain of our ratios fall outside the ~~insurer~~usual ~~into~~range ~~receivership~~for one or more IRIS ratio factors. The Ohio DOI has acknowledged this and taken no regulatory action, although we cannot guarantee that the Ohio DOI will not do so in the future.

~~In addition~~Further, the NAIC ~~Insurance~~has ~~Regulatory~~promulgated ~~Information~~a ~~System,~~Model orRegulation ~~IRIS,~~to isDefine aStandards ~~collection~~and ofCommissioner's ~~analytical~~Authority ~~tools~~for ~~designed~~Companies Deemed to ~~provide~~be ~~state~~in ~~insurance~~Hazardous ~~regulators~~Financial ~~with~~Condition, anor ~~integrated~~the ~~approach~~Hazardous toFinancial ~~screening~~Condition ~~and~~Standards, ~~analyzing~~which ~~the~~has ~~financial~~been ~~condition~~adopted ofby ~~insurance~~states ~~companies operating~~ in ~~their~~whole ~~respective~~or ~~states~~part. If our ~~ratios~~financial ~~fall~~condition ~~outside~~is ofdeemed ~~the~~by ~~usual~~state ~~range~~insurance ~~for~~regulators ~~one~~to ormeet ~~more ratios set forth by~~ the ~~NAIC~~Hazardous ~~for~~Financial ~~any~~Conditions ~~number of reasons~~Standards, it could subject us to heightened regulatory scrutiny or measures or create ~~investor~~ uncertainty around the stability of our financial condition, which ~~could~~would harm our business. WeThe ~~have disclosed to the~~ Ohio DOI ~~that~~has ~~certain~~determined ofthat our ~~ratios~~financial ~~fall~~condition ~~outside~~does ~~the~~meet ~~usual~~certain ~~range~~of ~~for~~those ~~one~~standards orand ~~more~~requires ~~IRIS~~us ~~ratio~~to ~~factors.~~provide ~~The~~the Ohio DOI ~~has~~with ~~acknowledged~~monthly ~~this~~financial ~~and~~reports. ~~taken~~The noSouth ~~regulatory~~Carolina ~~action,~~Department ~~although~~of ~~there~~Insurance ~~can~~and bethe noFlorida ~~assurance~~Office ~~that~~of ~~the~~Insurance ~~Ohio~~Regulation ~~DOI~~also ~~will~~require ~~not~~the doprovision soof inmonthly ~~the~~financial ~~future~~reports.

~~Further~~Similarly, ~~the~~our ~~NAIC~~wholly-owned, ~~has~~Cayman ~~promulgated~~Islands-based acaptive ~~Model~~reinsurer, ~~Regulation~~Root toRe, ~~Define~~is ~~Standards~~subject ~~and~~to ~~Commissioner's~~additional ~~Authority~~capital ~~for~~and ~~Companies~~other ~~Deemed~~regulatory torequirements beimposed inby ~~Hazardous Financial Condition, or~~ the ~~Hazardous~~CIMA. ~~Financial~~Although ~~Condition~~these ~~Standards,~~capital ~~which~~requirements ~~has~~are ~~been~~generally ~~adopted~~less byconstraining ~~states~~than ~~in whole or part~~U.S. Ifcapital ~~our~~requirements, ~~financial~~failure ~~condition is deemed by state insurance regulators~~ to ~~meet~~satisfy ~~the~~these ~~Hazardous~~requirements ~~Financial~~could ~~Conditions~~result ~~Standards,~~in itregulatory ~~could~~actions ~~subject~~from usthe toCIMA ~~heightened~~or ~~regulatory~~loss ~~scrutiny~~of or ~~measures~~modification orof ~~create~~Root ~~uncertainty~~Re’s ~~around~~Class ~~the~~B(iii) ~~stability~~insurer ~~of our financial condition~~license, which ~~could~~would ~~harm~~adversely ~~our~~impact ~~business. The Ohio DOI has determined that~~ our ~~financial~~ability ~~condition does meet certain of those standards and requires us~~ to ~~provide~~improve ~~the~~our ~~Ohio~~overall ~~DOI~~capital ~~with~~efficiency ~~monthly financial reports. The South Carolina Department of Insurance~~ and ~~the~~support ~~Florida~~our ~~Office~~“capital-efficient” ~~of Insurance Regulation also require the provision of monthly financial reports~~model.

Similarly, our wholly-owned, Cayman Islands-based captive reinsurer, Root Re, is subject to additional capital and other regulatory requirements imposed by the CIMA. Although these capital requirements are generally less constraining than U.S. capital requirements, failure to satisfy these requirements could result in regulatory actions from the CIMA or loss of or modification of Root Re’s Class B(iii) insurer license, which could adversely impact our ability to improve our overall capital efficiency and support our “capital-efficient” model.

As a newer entrant to the insurance industry, we may face additional capital and surplus requirements as compared to those of our larger and more established competitors. Failure to maintain adequate risk-based capital at the required levels could result in increasingly onerous reporting and examination requirements and could adversely affect our ability to maintain regulatory authority to conduct our business.

We may be unable to prevent, monitor or detect fraudulent activity, including policy acquisitions or payments of claims that are fraudulent in nature, or fraud that may be perpetrated by employees or external parties.

If we fail to maintain adequate systems and processes to prevent, monitor and detect fraud, including fraudulent policy acquisitions or claims activity, or if inadvertent errors occur with such prevention, monitoring and detection systems due to human or computer error, our business could be materially adversely impacted. While we believe past incidents of fraudulent activity by customers, purported customers and/or claimants have been relatively isolated, we cannot beguarantee ~~certain~~ that our systems and processes will always be adequate in the face of increasingly sophisticated and ever-changing fraud schemes. We use a variety of tools to protect against fraud, but these tools may not always be successful at preventing such fraud. Instances of fraud may result in increased costs, including possible settlement and litigation expenses, and could have a material adverse effect on our business and reputation.

In February 2023, we filed suit against a former senior marketing employee and other defendants to recover approximately $10 million of funds we believe were misappropriated,. ~~but~~A ~~there~~confidential ~~can~~settlement bewas noreached ~~guarantee~~with certain of these parties and the litigation continues as to others. It is unlikely that we will be able to recover ~~any~~all of the funds from such former employee or the other defendants. While we maintain insurance coverage to protect us against such loss, our coverage iswas less than the amount of that loss and may be insufficient or inadequate to cover future losses.

We rely on our mobile app to execute our business strategy. Government regulation of the internet and the use of mobile apps in particular is evolving, and unfavorable changes could seriously harm our business.

We rely on our mobile app to execute our business strategy. We are subject to general business regulations and laws as well as federal and state regulations and laws specifically governing the internet and the use of mobile apps in particular. Existing and future laws and regulations may impede the growth of the internet or other online services and increase the cost of providing online services. These regulations and laws may involve taxes, tariffs, privacy and data security, anti-spam, content protection, electronic contracts and communications, electronic signatures and

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and increase the cost of providing online services. These regulations and laws may involve taxes, tariffs, privacy and data security, anti-spam, content protection, electronic contracts and communications, electronic signatures and consents, consumer protection and social media marketing. It is at times not clear how existing laws governing issues such as property ownership, sales and other taxes and consumer privacy apply to the internet and the use of mobile apps in particular, as the vast majority of these laws were adopted prior to the advent of the internet and the use of mobile apps and do not contemplate or address the unique issues raised by the internet. It is possible that general business regulations and laws, or those specifically governing the internet and the use of mobile apps in particular, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot beguarantee ~~sure~~ that our practices have complied, currently comply or will comply fully with all such laws and regulations. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, a loss in business and proceedings or actions against us by governmental entities or others. Any such proceeding or action could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business and decrease the use of our mobile app or website by consumers and suppliers and may result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any such laws or regulations.

Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand.

Our trade secrets, trademarks, copyrights, patents, know-how, and other intellectual property rights are important assets for us, in the ~~United~~U.S. ~~States~~ and other jurisdictions. We rely on, and expect to continue to rely on, various agreements with our employees, independent contractors, consultants and third parties with whom we have relationships, as well as trademark, trade dress, domain name, copyright, and trade secret laws, to protect our brand and other intellectual property rights. Such agreements may not effectively prevent unauthorized use or disclosure of our confidential information, intellectual property or technology and may not provide an adequate remedy in the event of unauthorized use or disclosure of our confidential information, intellectual property or technology, and we may fail to consistently obtain, police and enforce such agreements. Additionally, various factors outside our control pose a threat to our intellectual property rights, as well as to our products, services and technologies. For example, we may fail to obtain effective intellectual property protection, or effective intellectual property protection may not be available in every country in which our products and services are ~~available~~accessible. Also, the efforts we have taken to protect our intellectual property rights may not be sufficient or effective, especially in foreign jurisdictions, and any of our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable. Despite our efforts to protect our proprietary rights, ~~there~~we ~~can~~cannot beguarantee ~~no assurance~~ our intellectual property rights will be sufficient to protect against others offering products or services that are substantially similar to ours and compete with our business or that unauthorized parties may attempt to copy aspects of our technology and use information that we consider proprietary.

In addition to registered intellectual property rights such as trademark registrations, we rely on non-registered proprietary information and technology, such as trade secrets, confidential information, know-how and technical information. Certain information or technology that we endeavor to protect as trade secrets may not be eligible for trade secret protection in all jurisdictions, or the measures we undertake to establish and maintain such trade secret protection may be inadequate. In order to protect our proprietary information and technology, we rely in part on agreements with our employees, investors, independent contractors and other third parties that place restrictions on the use and disclosure of this intellectual property. These agreements may not adequately protect our trade secrets, these agreements may be breached, or this intellectual property, including trade secrets, may otherwise be disclosed or become known to our competitors, which ~~could~~would likely cause us to lose any competitive advantage resulting from this intellectual property. To the extent that our employees, independent contractors or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Current or future legal requirements may require us to disclose certain proprietary information or technology, such as our proprietary algorithms, to regulators or other third parties, including our competitors, which could impair or result in the loss of trade secret protection for such information or technology. The loss of trade secret protection could make it easier for third parties to compete with our products and services by copying functionality. In addition, any changes in, or unexpected interpretations of, intellectual property laws may compromise our ability to enforce our trade secret and intellectual property rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and

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property laws may compromise our ability to enforce our trade secret and intellectual property rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain protection of our trade secrets or other proprietary information could harm our business, results of operations, ~~and~~financial ~~competitive~~condition ~~position~~and prospects.

We have filed, and may continue in the future to file, applications to protect certain of our innovations and intellectual property. We do not know whether any of our applications will result in the issuance of a patent, trademark or copyright, as applicable, or whether the examination process will require us to narrow our claims or otherwise limit the scope of such intellectual property. In addition, we may not receive competitive advantages from the rights granted under our intellectual property. Our existing intellectual property, and any intellectual property granted to us or that we otherwise acquire in the future, may be contested, circumvented or invalidated, and we may not be able to prevent third parties from infringing our rights to our intellectual property. Therefore, the exact effect of the protection of this intellectual property cannot be predicted with certainty. Because obtaining patent protection requires disclosing our inventions to the public, such disclosure may facilitate our competitors developing improvements to our innovations. In addition, given the costs, effort, risks and downside of obtaining patent protection, including the requirement to ultimately disclose the invention to the public, we may choose not to seek patent protection for certain innovations. Any failure to adequately obtain such patent protection, or other intellectual property protection, could later prove to adversely impact our business. In addition, other parties may independently develop similar or competing technologies designed around any patents or patent applications that we hold. Some of our products and technologies are not covered by any patent or patent application. A failure to timely seek patent protection on products or technologies generally precludes us from seeking future patent protection on these products or technologies.

We currently hold various domain names relating to our brand, including root.com, joinroot.com, rootinsurance.com and root-enterprise.com. ~~Failure~~Third parties have in the past registered domain names confusingly similar to domain names we currently hold, and our failure to protect our domain names could adversely affect our reputation and brand and make it more difficult for ~~users~~customers to find our website and our mobile app. We may be unable, without significant cost or at all, to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights.

We may be required to spend significant resources in order to monitor and protect our intellectual property rights, and some violations may be difficult or impossible to detect. Litigation to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could impair the functionality of our platform, delay introductions of enhancements to our platform, result in our substituting inferior or more costly technologies into our platform or harm our reputation or brand. In addition, we may be required to license additional technology from third parties to develop and market new offerings or platform features, which may not be on commercially reasonable terms or at all and could adversely affect our ability to compete.

Although we take measures to protect our intellectual property, if we are unable to prevent the unauthorized use or exploitation of our intellectual property, the value of our brand, content, and other intangible assets may be diminished, competitors may be able to more effectively mimic our service and methods of operations, the perception of our business and service to customers and potential customers may become confused, and our ability to attract customers may be adversely affected. Any inability or failure to protect our intellectual property could adversely impact our business, results of operations, ~~and~~ financial condition and prospects. While we take precautions designed to protect our intellectual property, it may still be possible for competitors and other unauthorized third parties to copy our technology and use our proprietary brand, content and information to create or enhance competing solutions and services, which could adversely affect our competitive position in our rapidly evolving and highly competitive industry. Some license provisions that protect against unauthorized use, copying, transfer and disclosure of our technology may be unenforceable under the laws of certain jurisdictions and foreign countries. While we enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with our third-party providers and strategic partners, we cannot ~~assure~~guarantee ~~you~~ that these agreements will be effective in controlling access to, and use and distribution of, our products and proprietary

3234

information. Further, these agreements do not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our offerings.

Some of our products and services contain open source software, which may pose particular risks to our proprietary software, products, and services in a manner that could have a negative effect on our business.

We use open source software in our products and services and anticipate continuing to use open source software in the future. Some open source software licenses require those who distribute open source software as part of their own software product to publicly disclose all or part of the source code of such software product or to make available any derivative works of the open source code on unfavorable terms or at no cost, and we may be subject to such terms. The terms of certain open source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide or distribute our products or services. Additionally, we could face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that we develop using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to make our software source code freely available, purchase a costly license or cease offering the implicated products or services unless and until we can re-engineer such source code to eliminate use of such open source software. This re-engineering process ~~could~~would require us to expend significant additional research and development resources, and we may not be able to complete the re-engineering process successfully. In addition to risks related to license requirements, use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties, assurance of title or controls on the origin or operation of the open source software, which are risks that cannot be eliminated, and could, if not properly addressed, negatively affect our business. We have established processes to help alleviate these risks, including a review process for screening requests from our development teams for the use of open source software, but we cannot be sure that all of our use of open source software is in a manner that is consistent with our current policies and procedures, or will not subject us to liability. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could have a negative effect on our business, operating results, financial condition and ~~operating results~~prospects.

Claims by others that we infringed proprietary technology or other intellectual property rights could harm our business.

Companies in the telematics, internet and technology industries are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. In addition, certain companies and rights holders seek to enforce and monetize patents or other intellectual property rights they own, have purchased, or have otherwise obtained. As we gain an increasingly high public profile, intellectual property rights claims against us may become more frequent. From time to time, third parties have, and may in the future, assert claims of infringement of intellectual property rights against us. Although we believe that we have, ~~and will likely in the future have,~~ meritorious defenses, ~~there~~we ~~can~~cannot beguarantee ~~no assurance~~ that we will be successful in defending against these allegations or in reaching a business resolution that is satisfactory to us. Our competitors and others may now and in the future have significantly larger and more mature patent portfolios than us. In addition, future litigation may involve patent holding companies or other adverse patent owners who have no relevant product or service revenue and against whom our own patents may therefore provide little or no deterrence or protection. Many potential litigants, including some of our competitors and patent-holding companies, have the ability to dedicate substantial resources to the assertion of their intellectual property rights. Any claim of infringement by a third party, even those without merit, could cause us to incur substantial costs defending against the claim, could distract our management from our business and could require us to cease use of such intellectual property. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, we risk compromising our confidential information during this type of litigation. We may be required to pay substantial damages, royalties, licensing or other fees in connection with a claimant securing a judgment against us, we may be subject to an injunction or other restrictions that prevent us from using or distributing our intellectual property, or from operating under our brand, or we may agree to a settlement that prevents us from distributing our offerings or a portion thereof, which could adversely affect our business, results of operations, ~~and~~ financial condition and prospects.

3335

With respect to any intellectual property rights claim, we may have to seek out a license to continue operations found or alleged to violate such rights, which may not be available on favorable or commercially reasonable terms or at all and may significantly increase our operating expenses. Some licenses may be non-exclusive, and therefore our competitors may have access to the same technology licensed to us. If a third party does not offer us a license to its intellectual property on reasonable terms, or at all, we may be required to develop alternative, non-infringing technology, which could require significant time (during which we would be unable to continue to offer our affected offerings), effort and expense and may ultimately not be successful. Any of these events could adversely affect our business, results of operations, ~~and~~ financial condition and prospects.

If our customers were to claim that the insurance policies they purchased failed to provide adequate or appropriate coverage, we could face claims that could harm our business, results of operations, ~~and~~ financial condition and prospects.

Although we ~~aim~~endeavor to provide adequate and appropriate coverage under each of our policies, customers could purchase policies that prove to be inadequate or inappropriate. IfCustomers ~~such~~have ~~customers~~from ~~were~~time to ~~bring~~time amade ~~claim~~claims orand ~~claims~~could do so in the future alleging that we or our appointed insurance producers failed in their responsibilities to provide them with the type or amount of coverage that they sought to purchase,. We have settled some such claims in the past and we could in the future be found liable for amounts significantly in excess of the policy limit, resulting in an adverse effect on our business, results of operations, ~~and~~ financial condition and prospects. While we maintain ~~agents’~~ errors and omissions insurance coverage to protect us against such liability, such coverage may be insufficient or inadequate, or may be unavailable in the future.

If we are unable to underwrite risks accurately or charge competitive yet profitable rates to our customers, our business, results of operations, ~~and~~ financial condition and prospects will be adversely affected.

In general, the premiums for our insurance policies are established at the time a policy is issued and, therefore, before all of our underlying costs are known. The accuracy of our pricing depends on our ability to adequately assess risks, estimate losses and comply with state insurance regulations. Like other insurance companies, we rely on estimates and assumptions in setting our premium rates. We also utilize the data that we gather through our interactions with our customers and about our customers with their consent, as evaluated and curated by our technology-based pricing platform.

Establishing adequate premium rates is necessary, together with investment income, if any, to generate sufficient revenue to offset losses, LAE, and other costs. If we do not accurately assess the risks that we underwrite, the premiums that we charge may not be adequate to cover our losses and expenses, which would adversely affect our business, results of operations, ~~and~~financial ~~our~~condition ~~profitability~~and prospects. Moreover, if we determine that our prices are too low, insurance regulations may preclude us from being able to cancel insurance contracts, non-renew customers, or raise premiums. Alternatively, we could set our premiums too high, which could reduce our competitiveness and lead to fewer customers and lower revenues, which ~~could~~would likely have a material adverse effect on our business, results of operations, ~~and~~ financial condition and prospects.

Pricing involves the acquisition and analysis of historical loss data and the projection of future trends, loss costs and expenses, and inflation trends, among other factors, for each of our products in multiple risk tiers and many different markets. In order to accurately price our policies, we must:

•collect and properly analyze a substantial volume of data ~~from~~about our customers;

•develop, test and apply appropriate actuarial projections and rating formulas;

•review and evaluate competitive product offerings and pricing dynamics;

•closely monitor and timely recognize changes in trends; and

•project both frequency and severity of our customers’ losses with reasonable accuracy.

There are no assurances that we will have success in implementing our pricing methodology accurately in accordance with our assumptions. Our ability to accurately price our policies is subject to a number of risks and uncertainties, including:36

~~•insufficient~~There orare ~~unreliable~~no ~~data;~~guarantees that we be successful in implementing our pricing methodology accurately in accordance with our assumptions. Our ability to accurately price our policies is subject to a number of risks and uncertainties, including:

34•insufficient, inaccurate or unreliable data;

•incorrect or incomplete analysis of available data;

•uncertainties generally inherent in estimates and assumptions;

•our failure to implement appropriate actuarial projections and rating formulas or other pricing methodologies;

•incorrect or incomplete analysis of the competitive environment;

•regulatory constraints on rate increases; and

•our failure to accurately estimate investment yields and the duration of our liability for loss and LAE, as well as unanticipated court decisions, legislation or regulatory action.

To address the potential actual or perceived inadequacy of our current business model, we may be compelled to increase the amount allocated to cover policy claims, increase premium rates or adopt ~~tighter~~stricter underwriting standards, any of which ~~may~~would likely result in a decline in new business and renewals and, as a result, ~~could~~ have a material adverse effect on our business, results of operations, ~~and~~ financial condition and prospects.

WeOur ~~are~~insurance ~~subject~~operating toresults ~~assessments~~have been and ~~other~~will ~~surcharges~~likely ~~from~~continue ~~state~~to ~~guaranty~~be ~~funds~~materially adversely affected by severe weather or other catastrophic events, ~~which~~and climate change may ~~reduce~~be ~~our~~exacerbating ~~profitability~~these events and their impacts.

WeOur ~~are~~insurance ~~subject~~operating toresults ~~statutory~~have ~~property~~periodically been, and ~~casualty~~in ~~guaranty~~the ~~fund~~future ~~assessments~~will inlikely ~~many~~continue ~~states~~to inbe, ~~which~~materially weadversely doaffected ~~business.~~by ~~The~~natural ~~purpose~~events, ofsuch aas ~~guaranty~~hurricanes, ~~fund~~tornadoes, iswindstorms, tofloods, ~~protect~~fires, ~~customers~~hailstorms, inand asevere ~~particular~~winter ~~state~~weather. byThe ~~requiring~~frequency, ~~that~~severity, ~~solvent~~duration, ~~property~~ and ~~casualty~~geographic ~~insurers~~location ~~pay~~and ~~the~~scope ~~insurance claims~~ of ~~insolvent~~such ~~insurers~~events inare ~~such~~inherently ~~state~~unpredictable. ~~These~~Moreover, ~~guaranty~~climate ~~associations~~change ~~generally~~may ~~pay~~be ~~these~~contributing ~~claims~~to bythe ~~assessing~~increase ~~solvent~~in ~~insurers~~frequency ~~proportionately based on each insurer's share~~ of ~~voluntary~~severe ~~premiums~~weather ~~written~~events inand ~~the~~other ~~state.~~natural ~~During~~disasters, ~~the~~how ~~year~~long ~~ended~~they ~~December 31~~last, ~~2023,~~and ~~the~~how ~~amounts~~much weinsured ~~contributed~~damage tothey ~~such funds were immaterial; however~~cause, asand wemay ~~enter~~change ~~new~~where ~~states~~ the ~~amount~~events ~~we are required to contribute may increase materially~~occur.

~~Maximum~~The ~~contributions~~extent ~~required~~of bylosses ~~law~~from ina ~~any~~catastrophic ~~one~~event ~~year~~is ~~vary~~a byfunction ~~state.~~of Weour ~~cannot~~exposure ~~predict~~in ~~with~~the ~~certainty~~area affected by the ~~amounts~~event, ofthe ~~future~~nature, ~~assessments~~severity, ~~because~~and ~~they~~duration ~~depend~~of onthe ~~factors~~event, ~~outside~~and ~~our~~the ~~control,~~extent ~~such~~of asour ~~insolvencies~~excess of ~~other~~loss ~~insurance~~reinsurance ~~companies.~~that ~~Significant~~we ~~assessments~~have ~~due~~obtained with respect to such an event. As a ~~rise~~result, an increase in ~~insurance~~the ~~insolvencies~~frequency, ~~could~~severity ~~have~~or aduration, ~~material~~or ~~adverse~~unanticipated ~~effect~~changes onin ~~our~~geographic ~~financial~~location ~~condition~~or ~~and~~scope, of severe weather or other catastrophes could materially adversely affect our business, results of operations, financial condition and prospects.

~~Litigation~~We ~~and~~are ~~legal~~subject ~~proceedings~~to ~~filed~~assessments byand orother ~~against~~surcharges usfrom ~~and~~state ~~our~~guaranty ~~subsidiaries,~~funds ~~including~~from ~~shareholder~~time ~~litigation related~~ to ~~the initial public offering~~time, ~~could~~which ~~have a material adverse effect on our business, results of operations and financial condition, and~~ may ~~divert~~materially ~~management’s~~reduce ~~attention and resources away from~~ our ~~business~~profitability.

We are subject to statutory property and casualty guaranty fund assessments in many states in which we do business. The purpose of a guaranty fund is to protect customers in a particular state by requiring that solvent property and casualty insurers pay the insurance claims of insolvent insurers in such state. These guaranty associations generally pay these claims by assessing solvent insurers proportionately based on each insurer's share of voluntary premiums written in the state. During the year ended December 31, 2024, the amounts we contributed to such funds were immaterial; however, as we enter new markets the amounts we are required to contribute may increase materially.

Maximum contributions required by law in any one year vary by state. We cannot predict with certainty the amounts of future assessments because they depend on factors outside our control, such as insolvencies of other insurance companies. Significant assessments due to a rise in insurance insolvencies could have a material adverse effect on our business, results of operations, financial condition and prospects.

Litigation and legal proceedings filed by or against us and our subsidiaries, could have a material adverse effect on our business, results of operations, financial condition and prospects, and may divert management’s attention and resources away from our business.

From time to time, we are subject to allegations, and are party to litigation and legal proceedings relating to our business operations. Litigation and other proceedings include complaints from or litigation by customers or reinsurers, related to alleged breaches of contract or otherwise. We expect that as our market share increases, competitors may pursue litigation to require us to change our business practices or offerings and limit our ability to compete effectively.

As is typical in the insurance industry, we continually face risks associated with litigation of various types arising in the normal course of our business operations, including disputes relating to insurance claims under our policies as well as other general commercial and corporate litigation. Members of the insurance industry are periodically the target of class action lawsuits and other types of litigation, some of which involve claims for substantial or indeterminate amounts, and the outcomes of which are unpredictable. ~~We are currently defending a putative class action filed in Texas.~~ Claims against insurers could be based on a variety of issues, including the sale of insurance policies and claim settlement practices. In addition, because we employ a technology platform to collect customer data, it is possible that customers, regulators or consumer groups could bring individual or class action claims alleging that our methods of obtaining consent and collecting data and pricing risk are improper and/or impermissibly discriminatory. We cannot ~~predict~~guarantee ~~with any certainty whether~~ we will not be involved in such litigation in the future or what impact such litigation would have on our business. We have successfully defended against some class action lawsuits in the past, and settled others. If we were to be involved in future litigation and it was determined adversely, it could require us to pay significant damages or to change aspects of our operations, either of which ~~could~~would likely have a material adverse effect on our business. Even claims without merit can be time-consuming and costly to defend and may divert management’s attention and resources away from implementing our strategy and adversely affect our business, results of operations, financial condition and prospects. Additionally, routine lawsuits over claims that are not individually material could in the future become material if aggregated with a substantial number of similar lawsuits. In addition to increasing costs, a significant volume of customer complaints or litigation could also adversely affect our brand and reputation, regardless of whether such allegations have merit or whether we are liable. While we maintain excess of loss and insurance company professional liability insurance coverage to protect us against such liability, such coverage may be insufficient or inadequate, or may be unavailable in the future. We cannot predict the costs of defense, the costs of prosecution, insurance coverage or the ultimate outcome of litigation or other proceedings filed by or against us, including remedies or damage awards, and adverse results in such litigation, and other proceedings may harm our business, results of operations, financial condition and prospects.

our financial results. Even claims without merit can be time-consuming and costly to defend and may divert management’s attention and resources away from our business and adversely affect our business, results of operations and financial condition. Additionally, routine lawsuits over claims that are not individually material could in the future become material if aggregated with a substantial number of similar lawsuits. In addition to increasing costs, a significant volume of customer complaints or litigation could also adversely affect our brand and reputation, regardless of whether such allegations have merit or whether we are liable. We cannot predict with certainty the costs of defense, the costs of prosecution, insurance coverage or the ultimate outcome of litigation or other proceedings filed by or against us, including remedies or damage awards, and adverse results in such litigation, and other proceedings may harm our business and financial condition.

Additionally, on May 19, 2021, a purported class action complaint was filed against the Company and certain of its current officers and directors in the U.S. District Court for the Southern District of Ohio (Case No. 2:21-cv-01197) on behalf of certain Root shareholders alleging that defendants made false or misleading statements and omissions of purportedly material fact, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and Rule 10b-5 thereunder, and of Sections 11 and 15 of the Securities Act of 1933, or the Securities Act, in connection with and following the Company’s initial public offering. While this action was dismissed by the District Court, such dismissal has been appealed. On June 27, 2022, a verified shareholder derivative complaint was filed against certain of the Company’s current and former officers and directors in the U.S District Court for the District of Delaware (Case No. 1:22-cv-00865). The Company was named as a nominal defendant. The complaint alleges that defendants made false or misleading statements and omissions of purportedly material fact, in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, breached their fiduciary duties and/or aided and abetted the breach of fiduciary duties, were unjustly enriched, wasted corporate assets, and are liable under Section 11(f) of the Securities Act, in connection with and following the Company’s initial public offering. This litigation can subject us to substantial costs and divert resources and the attention of management from our business. If these claims are successful, our business could be seriously harmed. Even if the claims do not result in protracted litigation or are resolved in our favor, the time and resources needed to resolve them could divert our management’s resources and seriously harm our business.

Our ability to utilize our net operating loss carryforwards may be limited.

As of December 31, ~~2023~~2024, we had federal income tax net operating losses, or NOLs, of approximately $1,~~336~~292.23 million available to offset our future taxable income, if any, prior to consideration of annual limitations that may be imposed under Section 382 of the Internal Revenue Code, or the Code, or otherwise. Of our federal NOLs, $~~662~~622.48 million of losses will begin to expire in tax years ~~2035~~2038 through 2043 and $~~673~~669.85 million of losses can be carried forward indefinitely.

We may be unable to fully use our NOLs, if at all. Under Section 382 of the Code, if a corporation undergoes an “ownership change” (very generally defined as a greater than 50% change, by value, in the corporation’s equity ownership by certain shareholders or groups of shareholders over a rolling three-year period), the corporation’s ability to use its pre-ownership change NOLs to offset its post-ownership change income may be limited. We have experienced ownership changes in the past, and we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If we undergo a future ownership change, we may be prevented from fully utilizing our NOLs existing at the time of the ownership change prior to their expiration. Future regulatory changes could also limit our ability to utilize our NOLs. To the extent we are not able to offset future taxable income with our NOLs, our net income and cash flows may be adversely affected.

The Tax Cuts and Jobs Act, or the Tax Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, among other things, includes changes to U.S. federal tax rates and the rules governing NOL carryforwards. For federal NOLs arising in tax years beginning after December 31, 2017, the Tax Act as modified by the CARES Act limits a taxpayer’s ability to utilize non-P&C NOL carryforwards in taxable years beginning after December 31, 2020, to 80% of taxable income. In addition, federal non-P&C NOLs arising in tax years beginning after December 31, 2017 can be carried forward indefinitely, but carryback of NOLs are generally permitted to the prior five taxable years only for NOLs arising in taxable years beginning before January 1, 2021 and after December 31, 2017. Deferred tax assets for NOLs will need to be measured at the applicable tax rate in effect 38

36The Tax Cuts and Jobs Act, or the Tax Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, among other things, includes changes to U.S. federal tax rates and the rules governing NOL carryforwards. For federal NOLs arising in tax years beginning after December 31, 2017, the Tax Act as modified by the CARES Act limits a taxpayer’s ability to utilize non-P&C NOL carryforwards in taxable years beginning after December 31, 2020, to 80% of taxable income. In addition, federal non-P&C NOLs arising in tax years beginning after December 31, 2017, can be carried forward indefinitely, but carryback of NOLs are generally permitted to the prior five taxable years only for NOLs arising in taxable years beginning before January 1, 2021 and after December 31, 2017. Deferred tax assets for NOLs will need to be measured at the applicable tax rate in effect when the NOLs are expected to be utilized. This limitation on use of NOLs may significantly impact our ability to utilize our NOLs to offset taxable income in the future. In addition, for state income tax purposes, there may be periods during which the use of NOL carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. For example, California imposed limits on the usability of California state NOLs to offset taxable income in tax years beginning after 2019 and before 2023.

~~when~~The ~~the~~manner ~~NOLs~~in ~~are~~which ~~expected~~we tofund betax ~~utilized.~~withholding ~~This~~obligations ~~limitation~~that onwill ~~use~~arise ofupon ~~NOLs~~vesting ~~may~~of ~~significantly~~outstanding ~~impact~~restricted ~~our~~stock ~~ability~~awards tomay ~~utilize~~require ~~our~~us ~~NOLs~~ to ~~offset~~use ~~taxable~~a ~~income~~substantial inamount ~~the~~of ~~future. In addition~~cash, ~~for~~which ~~state~~would ~~income~~reduce ~~tax~~our ~~purposes~~liquidity, ~~there~~or may beresult ~~periods~~in ~~during~~sales ~~which~~of ~~the~~shares ~~use~~ of ~~NOL~~our ~~carryforwards~~Class isA ~~suspended~~common orstock ~~otherwise~~into ~~limited~~the market, which could ~~accelerate~~cause orthe ~~permanently~~market ~~increase~~price ~~state~~of ~~taxes~~our ~~owed.~~Class ~~For~~A ~~example,~~common ~~California~~stock ~~imposed limits on the usability of California state NOLs~~ to ~~offset taxable income in tax years beginning after 2019 and before 2023~~decline.

As of December 31, 2024, our executive officers and other employees held an aggregate of 1.5 million unvested equity awards, including up to a maximum of 0.6 million unvested equity awards that are scheduled to vest in the ordinary course during 2025. Tax withholding obligations arise upon vesting of equity awards 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 awards by withholding shares and remitting cash to the relevant tax authorities, the 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. Net tax withholding obligations will vary based upon, among other things: the price of our Class A common stock at the time of vesting; the applicable tax withholding rates then in effect; the number of employees electing to pay us an amount in cash, via a broker, sufficient to cover their applicable tax withholding obligations; whether we continue to arrange for withholding in respect of vesting; the number of equity awards that may be forfeited prior to vesting; the level of achievement with respect to performance- or market-based awards; and the timing and amounts of future equity awards.

We may seek to implement “sell-to-cover” arrangements with one or more holders of equity awards to minimize our expenditure of cash to satisfy tax withholding obligations. Under such arrangements, a broker would assist the holder in selling, in the open market, all or a portion of the shares subject to the equity award vesting and would remit a portion of the sales proceeds to us. We would in turn remit such amounts to the taxing authorities. Such “sell-to-cover” arrangements would enable us to satisfy tax withholding obligations and remain in a net neutral cash position, but would result in sales of shares of our Class A common stock into the market, and such sales could cause the market price of our Class A common stock to decline. In addition, if the price of our Class A common stock appreciates rapidly or experiences temporary dislocations that coincide with vesting dates, we may not be able to change our withholding methodology prior to vesting events.

Future obligations could have a negative impact on our liquidity and ability to use funds for operational purposes and could have a material adverse effect on our business, results of operations, financial condition and prospects.

Risks Related to Our Business Model and Industry

The insurance business, including the market for automobile, ~~renters~~ and ~~homeowners~~renters insurance, is historically cyclical in nature, and we may experience periods with excess underwriting capacity and unfavorable premium rates, which could adversely affect our business.

Historically, insurers have experienced significant fluctuations in operating results due to competition, frequency and severity of catastrophic events, levels of capacity, adverse litigation trends, regulatory constraints, general economic conditions, and other factors. The supply of insurance is related to prevailing prices, the level of insured losses and the level of capital available to the industry that, in turn, may fluctuate in response to changes in rates of return on investments being earned in the insurance industry. As a result, the insurance business historically has been a cyclical industry characterized by periods of intense price competition due to excessive underwriting capacity as well as periods when shortages of capacity increase premium levels. Demand for insurance depends on numerous factors, including the frequency and severity of catastrophic events, levels of capacity, the introduction of new capital providers and general economic conditions. All of these factors fluctuate and may contribute to price declines generally in the insurance industry.

We cannot predict with certainty whether market conditions will improve, remain constant or deteriorate. Negative market conditions may impair our ability to underwrite insurance at rates we consider appropriate and commensurate relative to the risk assumed. Additionally, negative market conditions could result in a decline in policies sold, an increase in the frequency of claims and premium defaults, and an uptick in the frequency of falsification of claims. If we cannot underwrite insurance at appropriate rates, our ability to transact business will be materially and adversely affected. Any of these factors could lead to an adverse effect on our business, results of operations, ~~and~~ financial condition and prospects.

Retention of business written by us or through our Texas county mutual arrangement could expose us to potential losses.

We retain risk for business underwritten by our insurance company subsidiaries, including business assumed through our Texas county mutual arrangement. The determination to retain risk by reducing the amount of external reinsurance, by being unwilling or unable to obtain reinsurance, or by not purchasing reinsurance for a particular risk, customer segment or niche, is based on a complex variety of factors, including market conditions, strategy, pricing, availability of reinsurance, our capital levels, loss experience and tolerance. Historically, we have utilized reinsurance to expand our capacity to write more business than our insurance subsidiaries’ surplus would have otherwise supported. Currently, we are ceding less of our business to external reinsurers than we have done previously. A determination by us to continue to retain greater risk, or the retention of even more business in the future, increases our financial exposure to losses and significant losses could have a material adverse effect on our business, results of operations, financial condition, ~~liquidity~~ and ~~results of operations~~prospects.

Reinsurance may be unavailable at current levels and prices, which may limit our ability to underwrite new policies. Furthermore, reinsurance subjects us to counterparty risk and may not be adequate to protect us against losses, which could have an adverse effect on our results of operations and financial condition.

Reinsurance is a contract by which an insurer, which may be referred to as the ceding insurer, agrees with a second insurer, called a reinsurer, that the reinsurer will cover a portion of the losses incurred by the ceding insurer in the event a claim is made under a policy issued by the ceding insurer, in exchange for a premium. Our regulated insurance subsidiaries, ~~Root Insurance Company and Root Property & Casualty Insurance Company,~~ obtain reinsurance to help manage exposure to property and casualty insurance risks.

37Although our reinsurance counterparties are liable to us according to the terms of the reinsurance treaties, we remain primarily liable to our policyholders as the direct insurers on all risks reinsured. As a result, reinsurance does not eliminate the obligation of our regulated insurance subsidiary to pay all claims, and we are subject to the risk that one or more of our reinsurers will be unable or unwilling to honor its obligations, that the reinsurers will not pay in a timely fashion, or that our losses are so large that they exceed the limits inherent in our reinsurance contracts. We are also subject to the risk that under applicable insurance laws and regulations we may not be able to take credit for the reinsurance on our financial statements and instead would be required to hold separate admitted assets as reserves to cover claims on the risks that we have ceded to the reinsurer. Reinsurers may become financially

Although our reinsurance counterparties are liable to us according to the terms of the reinsurance policies, we remain primarily liable to our policyholders as the direct insurers on all risks reinsured. As a result, reinsurance does not eliminate the obligation of our regulated insurance subsidiary to pay all claims, and we are subject to the risk that one or more of our reinsurers will be unable or unwilling to honor its obligations, that the reinsurers will not pay in a timely fashion, or that our losses are so large that they exceed the limits inherent in our reinsurance contracts, limiting recovery. We are also subject to the risk that under applicable insurance laws and regulations we may not be able to take credit for the reinsurance on our financial statements and instead would be required to hold separate admitted assets as reserves to cover claims on the risks that we have ceded to the reinsurer. Reinsurers may become financially unsound by the time that they are called upon to pay amounts due, which may not occur for many years, in which case we may have no legal ability to recover what is due to us under our agreement with such reinsurer. Any disputes with reinsurers regarding coverage under reinsurance contracts could be time consuming, costly, and uncertain of success.40

~~Market~~unsound ~~conditions~~by ~~beyond our control impact~~ the ~~availability~~time ~~and cost of the reinsurance we purchase. No assurances can be made~~ that ~~reinsurance~~they ~~will~~are ~~remain~~called ~~continuously~~upon ~~available~~ to uspay toamounts ~~the same extent and on the same terms and rates as is currently available~~due, aswhich ~~such availability depends in part on factors outside of our control. A new contract~~ may not ~~provide~~occur ~~sufficient~~for ~~reinsurance~~many ~~protection. Market forces and external factors~~years, ~~such as significant losses from hurricanes or terrorist attacks or an increase~~ in ~~capital~~which ~~and~~case ~~surplus requirements, impact the availability and cost of the reinsurance~~ we ~~purchase.~~may Ifhave weno ~~were~~legal ~~unable~~ability to ~~maintain~~recover ~~our~~what ~~current~~is ~~level~~due ofto ~~reinsurance~~us orunder ~~purchase~~our ~~new~~agreement ~~reinsurance~~with ~~protection~~such inreinsurer. ~~amounts~~Any ~~that~~disputes wewith ~~consider~~reinsurers ~~sufficient~~regarding atcoverage ~~acceptable~~under ~~prices,~~reinsurance wecontracts ~~would~~could ~~have~~be totime ~~either accept an increase in our catastrophe exposure~~consuming, ~~reduce our insurance underwritings~~costly, orand ~~develop~~uncertain orof ~~seek other alternatives~~success.

~~The~~Market ~~unavailability~~conditions ofbeyond ~~acceptable~~our ~~reinsurance~~control ~~protection~~impact ~~would~~the ~~have~~availability aand ~~materially~~cost ~~adverse~~of ~~impact~~the onreinsurance ~~our~~we ~~business~~purchase. ~~model,~~No ~~which~~guarantee ~~depends~~can onbe made that reinsurance ~~companies~~will toremain ~~absorb~~continuously ~~any~~available ~~unfavorable~~to ~~variance~~us ~~from~~to the ~~level~~same ofextent ~~losses~~and ~~anticipated~~on atthe ~~underwriting.~~same Ifterms weand ~~are~~rates ~~unable~~as tois ~~obtain~~currently ~~adequate~~available, ~~reinsurance~~as atsuch ~~reasonable~~availability ~~rates,~~depends wein ~~would~~part ~~have~~on tofactors ~~increase~~outside of our ~~risk~~control. ~~exposure~~A ornew ~~reduce~~reinsurance ~~the~~treaty ~~level~~may ofnot ~~our~~provide ~~underwriting~~sufficient ~~commitments~~protection. Market forces and external factors, ~~each~~such ofas ~~which~~significant ~~could~~losses ~~have~~from ahurricanes ~~material~~or ~~adverse~~terrorist ~~effect~~attacks ~~upon~~or ~~our~~an ~~business~~increase ~~volume~~in capital and ~~profitability.~~surplus ~~Alternatively~~requirements, impact the availability and cost of the reinsurance we ~~could~~purchase. ~~elect~~If we were unable to ~~pay~~maintain ~~higher~~our ~~than~~current ~~reasonable~~level ~~rates~~of ~~for~~reinsurance or purchase new reinsurance ~~coverage,~~protection ~~which~~in ~~could~~amounts ~~have~~that awe ~~material~~consider ~~adverse~~sufficient ~~effect~~at ~~upon~~acceptable ~~our~~prices, ~~profitability~~we ~~unless~~would ~~policy~~have ~~premium~~to ~~rates~~either ~~could~~accept bean ~~raised,~~increase in ~~most~~our ~~cases~~catastrophe ~~subject~~exposure, toreduce ~~approval~~our byinsurance ~~state regulators~~underwritings, toor ~~offset~~develop ~~this~~or ~~additional~~seek ~~cost.~~other alternatives.

The unavailability of acceptable reinsurance protection would have a materially adverse impact on our business model, which depends on reinsurance companies to absorb any unfavorable variance from the level of losses anticipated at underwriting. If we are unable to obtain adequate reinsurance at reasonable rates, we would have to increase our risk exposure or reduce the level of our underwriting commitments, each of which would have a material adverse effect upon our business and profitability. Alternatively, we could elect to pay higher than reasonable rates for reinsurance coverage, which would have a material adverse effect upon our profitability unless policy premium rates could be raised, in most cases subject to approval by state regulators, to offset this additional cost.

Reinsurance subjects us to risks of our reinsurers and may not be adequate to protect us against losses arising from ceded insurance, which could have an adverse effect on our results of operations and financial condition.

The collectability of reinsurance recoverables is subject to uncertainty arising from a number of factors, including changes in market conditions, whether insured losses meet the qualifying conditions of the reinsurance contract and whether reinsurers, their affiliates, or certain regulatory bodies have the financial capacity and willingness to make payments under the terms of a reinsurance treaty or contract. Any disruption, volatility and uncertainty in the financial reinsurance markets may decrease our ability to access such markets on favorable terms, or at all. In addition, we are subject to the risk that one or more of our reinsurers will not honor its obligations, that the reinsurers will not pay in a timely fashion, or that our losses are so large that they exceed the limits inherent in our reinsurance contracts, limiting recovery. Reinsurers may become financially unsound by the time that they are called upon to pay amounts due, which may not occur for many years, in which case we may have no legal ability to recover what is due to us under our agreement with such reinsurer. For instance, certain reinsurers, including reinsurers utilized by us, have become financially unsound in the past. In addition, any disputes with reinsurers regarding coverage under reinsurance contracts could be time consuming, costly, and uncertain of success. Our inability to collect a material recovery from a reinsurer could have a material effect on our business, results of operations, ~~and~~ financial condition and prospects.

We are subject to extensive regulation and potential further restrictive regulation may increase our operating costs and limit our growth.

We are subject to extensive laws, regulations and ~~regulations~~various approvals by the individual state insurance departments in the states in which we transact business and the CIMA as it pertains to our captive reinsurance company. These laws, regulations and ~~regulations~~approvals are complex and subject to change. Changes may sometimes lead to additional expenses, increased legal exposure, increased required reserves or capital and surplus, and additional limits on our ability to grow or to achieve targeted profitability. Regulations to which our licensed insurance carriers and producer subsidiaries are subject include, but are not limited to: prior approval of transactions resulting in a change of “control”; approval of policy forms and premiums; approval of intercompany service agreements and reinsurance agreements; statutory and risk-based capital solvency requirements, including the minimum capital and surplus our regulated insurance subsidiary must maintain; and establishing minimum reserves that insurance carriers must hold to pay projected insurance claims.

3841

~~exposure,~~To ~~increased~~the ~~required~~extent ~~reserves~~we ordecide ~~capital~~to ~~and~~expand ~~surplus~~our current product offerings to include other insurance products, ~~and~~this would subject us to additional ~~limits~~regulatory onrequirements ~~our~~and ~~ability~~scrutiny toin ~~grow~~each orstate in which we elect to ~~achieve~~offer ~~targeted~~such ~~profitability~~products. ~~Regulations~~Several tostates ~~which~~have ~~our~~also ~~licensed~~adopted ~~insurance~~legislation ~~carriers~~prohibiting unfair methods of competition and ~~producer~~unfair ~~subsidiaries~~or ~~are~~deceptive ~~subject~~acts and practices in the business of insurance as well as prohibiting unfair claims practices. Prohibited practices include, but are not limited to:, ~~prior~~misrepresentations, ~~approval~~false ofadvertising, ~~transactions~~coercion, ~~resulting~~disparaging other insurers, unfair claims settlement procedures, and discrimination in athe ~~change~~business of ~~“control”;~~insurance. ~~approval~~Noncompliance ofwith ~~policy~~any ~~forms~~of ~~and~~such ~~premiums;~~state ~~approval~~statutes ofmay ~~intercompany~~subject ~~service~~us ~~agreements;~~to ~~statutory~~legal and ~~risk-based~~regulatory ~~capital~~action ~~solvency~~by ~~requirements,~~the ~~including~~relevant ~~the~~state ~~minimum~~insurance ~~capital~~regulator, and ~~surplus~~possibly ~~our~~private ~~regulated~~litigation. ~~insurance~~States ~~subsidiary~~also ~~must~~regulate ~~maintain;~~various ~~and~~aspects ~~establishing~~of ~~minimum~~the ~~reserves~~contractual ~~that~~relationships ~~insurance~~between ~~carriers~~insurers ~~must~~and ~~hold~~independent toagents ~~pay~~as ~~projected~~well ~~insurance~~as, ~~claims~~in certain states, insurers and third-party administrators.

ToAlthough ~~the~~state ~~extent~~insurance weregulators ~~decide~~have toprimary ~~expand~~responsibility ~~our~~for ~~current~~administering ~~product~~and ~~offerings~~enforcing toinsurance ~~include~~regulations ~~other~~in ~~insurance~~the ~~products~~U.S., ~~this~~such ~~would~~laws ~~subject~~and usregulations toare ~~additional~~further ~~regulatory~~administered ~~requirements~~ and ~~scrutiny~~enforced inby a number of additional governmental authorities, each of which exercises a degree of interpretive latitude, including state insecurities ~~which~~administrators; westate ~~elect~~attorneys togeneral ~~offer~~as ~~such~~well ~~products.~~as ~~Several~~federal ~~states~~agencies ~~have~~including ~~also~~the ~~adopted~~SEC, ~~legislation~~the ~~prohibiting~~Financial ~~unfair~~Industry ~~methods~~Regulatory Authority, the Federal Reserve Board, the Federal Insurance Office, the U.S. Department of ~~competition~~Labor, the U.S. Department of Justice and ~~unfair~~the National Labor Relations Board. Consequently, compliance with any particular regulator’s or ~~deceptive~~enforcement ~~acts~~authority’s ~~and~~interpretation ~~practices~~of a legal issue may not result in ~~the~~compliance ~~business~~with another’s interpretation of ~~insurance~~the assame ~~well~~issue, asparticularly ~~unfair~~when ~~claims~~compliance ~~practices~~is judged in hindsight. ~~Prohibited~~Such ~~practices~~regulations ~~include,~~or ~~but~~enforcement actions are ~~not~~often ~~limited~~responsive to current consumer and political sensitivities, ~~misrepresentations~~which may arise after a major event. Such rules and regulations may result in rate suppression, ~~false~~limit ~~advertising~~our ability to manage our exposure to unprofitable or volatile risks, ~~coercion~~or lead to fines, ~~disparaging~~premium refunds or other ~~insurers,~~adverse ~~unfair~~consequences. ~~claims~~The ~~settlement~~federal ~~procedures~~government also may regulate aspects of our businesses, ~~and~~such ~~discrimination~~as inthe protection of consumer confidential information or the ~~business~~use of consumer insurance (credit) scores to underwrite and assess the risk of customers under the Fair Credit Reporting Act, or FCRA. ~~Noncompliance~~Among other things, the FCRA requires that insurance companies (i) have a permissible purpose before obtaining and using a consumer report for underwriting purposes and (ii) comply with related notice and recordkeeping requirements. Failure to comply with federal requirements under the FCRA or any ofother ~~such~~applicable ~~state~~federal ~~statutes~~laws ~~may~~could subject us to regulatory ~~action~~fines byand other sanctions. In addition, given our short operating history and rapid rate of growth, we are more vulnerable to regulators identifying errors in the ~~relevant~~policy ~~state~~forms ~~insurance~~we ~~regulator~~use, the rates we charge, or with respect to our customer communications, and ~~possibly~~consumer-initiated ~~private~~litigation, including class action litigation., ~~States~~pursuant ~~also~~to ~~regulate~~regulations ~~various~~providing ~~aspects~~a private right of action. As a result of such noncompliance, regulators have in the ~~contractual~~past ~~relationships~~imposed ~~between~~non-material ~~insurers~~fines and ~~independent~~penalties ~~agents~~and ascould ~~well~~in asthe future impose fines, rebates or other penalties, including cease-and-desist orders with respect to our operations in ~~certain~~an individual state, or all states, ~~insurers~~until ~~and~~the ~~third-party~~identified ~~administrators~~noncompliance is rectified.

~~Although~~In ~~state insurance regulators have primary responsibility for administering and enforcing insurance regulations in the United States~~addition, ~~such~~there ~~laws~~is ~~and~~risk ~~regulations~~that are further administered and enforced by a number of additional governmental authorities, each of which exercises a degree of interpretive latitude, including state securities administrators; state attorneys general as well as federal agencies including the SEC, the Financial Industry Regulatory Authority, the Federal Reserve Board, the Federal Insurance Office, the U.S. Department of Labor, the U.S. Department of Justice and the National Labor Relations Board. Consequently, compliance with any particular regulator’s or enforcement authority’s interpretation of a legal issue ~~may~~or ~~not~~the ~~result~~scope inof ~~compliance~~a ~~with another~~regulator’s ~~interpretation~~authority ofmay ~~the~~change ~~same~~over ~~issue~~time, ~~particularly~~or ~~when~~may ~~compliance~~change isdue ~~judged~~to ina ~~hindsight.~~court ~~Such~~order ~~regulations~~ or ~~enforcement~~judgment, ~~actions are often responsive~~ to ~~current~~our ~~consumer~~detriment. ~~and~~There ~~political~~is ~~sensitivities,~~also ~~which~~a ~~may~~risk ~~arise~~that ~~after~~changes ain ~~major~~the ~~event.~~overall ~~Such~~legal ~~rules~~environment ~~and regulations~~ may ~~result~~cause inus ~~rate suppression, limit our ability~~ to ~~manage~~change our ~~exposure~~views toregarding ~~unprofitable~~the oractions ~~volatile~~we ~~risks,~~need ~~or lead~~ to ~~fines,~~take ~~premium~~from ~~refunds~~a orlegal ~~other~~risk ~~adverse~~management ~~consequences~~perspective. ~~The~~This ~~federal~~would ~~government~~necessitate ~~also~~changes ~~may~~to ~~regulate aspects of~~ our ~~businesses,~~practices ~~such~~that asmay ~~the~~adversely ~~protection~~impact ofour ~~consumer~~business. ~~confidential~~Furthermore, ~~information~~in orsome ~~the~~cases, ~~use~~these oflaws ~~consumer~~and ~~insurance~~regulations ~~(credit)~~are ~~scores~~designed to ~~underwrite~~protect ~~and~~or ~~assess~~benefit the ~~risk~~interests of ~~customers~~a ~~under~~specific ~~the~~constituency ~~Fair~~rather ~~Credit~~than ~~Reporting~~a ~~Act,~~range orof ~~FCRA~~constituencies. ~~Among~~State ~~other~~insurance ~~things,~~laws ~~the~~and ~~FCRA~~regulations ~~requires~~are ~~that~~generally ~~insurance~~intended ~~companies~~to ~~(i)~~protect ~~have~~the ainterests ~~permissible~~of ~~purpose~~purchasers ~~before~~or ~~obtaining~~users ~~and~~of ~~using~~insurance aproducts, ~~consumer~~rather ~~report~~than ~~for~~the ~~underwriting~~holders ~~purposes~~of ~~and~~securities ~~(ii)~~that ~~comply~~we ~~with~~issue. ~~related~~For ~~notice~~example, ~~and~~state ~~recordkeeping~~insurance ~~requirements.~~laws ~~Failure~~are togenerally ~~comply~~prescriptive with ~~federal~~respect ~~requirements~~to ~~under~~ the ~~FCRA~~content orand ~~any~~timeliness ~~other~~of ~~applicable~~notices ~~federal~~we ~~laws~~must ~~could~~provide ~~subject~~policyholders. Failure us to ~~regulatory~~comply ~~fines~~with ~~and~~ other ~~sanctions.~~state Ininsurance ~~addition,~~laws ~~given our short operating history~~ and ~~rapid~~regulations ~~rate of growth, we are more vulnerable to regulators identifying errors~~ in the ~~policy~~future ~~forms~~could wealso ~~use,~~have ~~the~~a ~~rates~~material weadverse ~~charge,~~effect oron ~~with respect to~~ our ~~customer communications~~business, ~~and~~operating ~~consumer-initiated litigation~~results, ~~including~~financial ~~class~~condition ~~action~~and ~~litigation,~~prospects. ~~pursuant~~As toanother ~~regulations~~example, ~~providing~~the afederal ~~private~~government ~~right~~could ofpass ~~action. As~~ a ~~result~~law ofexpanding ~~such~~its ~~noncompliance,~~authority ~~regulators~~to ~~have~~regulate in the ~~past~~insurance ~~imposed~~industry, ~~non-material~~expanding ~~fines~~federal ~~and~~regulation ~~penalties~~over ~~and~~our ~~could~~business into ~~the~~our ~~future~~detriment. ~~impose~~These ~~fines,~~laws ~~rebates or other penalties, including cease-~~and~~-desist~~ ~~orders~~regulations ~~with~~may ~~respect~~limit to our ~~operations~~ability into ~~an individual state~~grow, orraise ~~all~~additional ~~states,~~capital ~~until~~or improve the ~~identified~~profitability ~~noncompliance~~of isour ~~rectified~~business.

InOur ~~addition,~~ability ~~there is risk that any particular regulator’s or enforcement authority’s interpretation of a legal issue or the scope of a regulator’s authority may change over time~~ to ~~our~~retain ~~detriment.~~state ~~There~~licenses isdepends ~~also~~on ~~a risk that changes in the overall legal environment may cause us to change~~ our ~~views~~ability ~~regarding the actions we need~~ to ~~take~~meet ~~from~~licensing arequirements ~~legal~~established ~~risk~~by ~~management~~the ~~perspective.~~NAIC ~~This~~and ~~would~~adopted ~~necessitate~~by ~~changes~~each ~~to our practices that may adversely impact our business. Furthermore~~state, insubject ~~some cases, these laws and regulations are designed~~ to ~~protect~~variations oracross ~~benefit the interests of a specific constituency rather than a range of constituencies~~states. ~~State~~If ~~insurance~~we ~~laws and regulations~~ are ~~generally~~unable ~~intended~~ to ~~protect~~satisfy the ~~interests~~applicable oflicensing ~~purchasers~~requirements ~~or users~~ of ~~insurance~~any ~~products~~particular state, ~~rather than the holders of securities that~~ we ~~issue.~~could ~~For~~lose ~~example,~~our ~~state~~license ~~insurance laws are generally prescriptive with respect~~ to ~~the~~do ~~content~~business ~~and~~in ~~timeliness~~that ~~of notices we must provide policyholders. Failure to comply with other~~ state, ~~insurance~~which ~~laws~~would ~~and~~result ~~regulations~~ in the ~~future~~temporary ~~could~~or ~~also~~permanent ~~have~~cessation aof ~~material adverse effect on~~ our ~~business,~~operations ~~operating~~in ~~results~~that ~~and financial condition~~state. ~~As another example~~Alternatively, ~~the~~if ~~federal~~we ~~government~~are ~~could~~unable ~~pass a law expanding its authority~~ to ~~regulate~~satisfy ~~the~~applicable ~~insurance~~state ~~industry~~licensing requirements, ~~expanding~~we ~~federal regulation over our business to our detriment. These laws and regulations~~ may ~~limit~~be ~~our~~subject ~~ability~~ to ~~grow, raise~~ additional ~~capital~~regulatory oroversight, ~~improve~~have ~~the profitability of~~ our ~~business.~~

3942

Our ability to retain state licenses depends on our ability to meet licensing requirements established by the NAIC and adopted by each state, subject to variations across states. If we are unable to satisfy the applicable licensing requirements of any particular state, we could lose our license to do business in that state, which would result in the temporary or permanent cessation of our operations in that state. Alternatively, if we are unable to satisfy applicable state licensing requirements, we may be subject to additional regulatory oversight, have our license suspended, or be subject to the seizure of assets. Any such events could adversely affect our business, results of operations, or financial condition and prospects. See the sections titled (i) “Regulation — Insurance Regulation”, (ii) “Regulation — Insurance Holding Company Regulation” and (iii) “Regulation — Required Licensing” in Item 1. Business for additional information.

A regulatory environment that requires rate increases to be approved ~~and~~or that can dictate underwriting practices, ~~and~~ mandate participation in loss sharing arrangements, or require insurers to lower rates and/or disgorge profits may adversely affect our business, results of operations, ~~and~~ financial condition and prospects.

From time to time, political events and pressures affect the insurance market, including efforts to suppress rates to a level that may not allow us to reach targeted levels of profitability. For example, as our loss ratio compares favorably to that of the industry, ~~state or provincial~~ regulatory authorities may impose rate rollbacks, require us to pay premium refunds to policyholders or otherwise disgorge ourselves of profits, or challenge or otherwise delay our efforts to raise rates even if the property and casualty industry generally is not experiencing regulatory challenges to rate increases. Such challenges affect our ability to obtain approval for rate changes that may be required to achieve targeted levels of profitability and returns on equity.

In addition, certain states have enacted laws that require an insurer conducting business in that state to participate in assigned risk plans, reinsurance facilities and joint underwriting associations. Certain states also require insurers to offer coverage to all consumers, often restricting an insurer’s ability to charge the price it might otherwise charge. In these markets, we may be compelled to underwrite significant amounts of business at lower-than-desired rates, possibly leading to an unacceptable return on equity. Laws and regulations of many states also limit an insurer’s ability to withdraw from one or more lines of insurance there, except pursuant to a plan that is approved by the state insurance department. Additionally, as addressed above, certain states require insurers to participate in guaranty funds for impaired or insolvent insurance companies. These funds periodically assess losses against all insurance companies doing business in the state. Our business, results of operations, ~~and~~ financial condition and prospects could be adversely affected by any of these factors.

State insurance regulators impose additional reporting requirements regarding enterprise risk on insurance holding company systems, with which we must comply as an insurance holding company.

In the past decade, various state insurance regulators have increased their focus on risks within an insurer’s holding company system that may pose enterprise risk to the insurer. AsFor an example, an insurance holding company system’s ultimate controlling person is required to submit annually to its primary state insurance regulator an “enterprise risk report” that identifies activities, circumstances or events involving one or more affiliates of an insurer that, if not remedied properly, are likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole. ~~As the ultimate controlling person in the insurance holding company system, we are required to file an annual enterprise risk report.~~ On behalf of Root Insurance Company and Root Property & Casualty Insurance Company, Root Inc. submitted its annual enterprise risk report with Ohio on June 1, ~~2023~~2024, as required by Ohio law. Other changes include the requirement that a controlling person submit prior notice to its supervisory insurance regulator of a divestiture of control, having detailed minimum requirements for cost sharing and management agreements between an insurer and its affiliates and expansion of the agreements between an insurer and its affiliates to be filed with its supervisory insurance regulator.

There is also risk that insurance holding company systems may become subject to group capital requirements at the holding company level. The NAIC has developed a group capital calculation covering all entities in our insurance company group for us in solvency monitoring activities. The group capital calculation provides regulators with an additional analytical tool for conducting supervisory activities. The state of our primary ~~state~~ insurance regulator, Ohio, provides that an insurance holding company system that does not write business outside the ~~United States~~U.S., like us, is not required to file a group capital calculation until June 1, 2025.

We rely on technology and intellectual property from third parties to operate our business, including for pricing and underwriting our insurance policies, handling claims and maximizing automation, the unavailability or inaccuracy of which could limit the functionality of our products and disrupt our business.

Our business is highly dependent upon our ability to perform necessary business functions in an efficient and uninterrupted manner. The shut-down, disruption, degradation or unavailability of one or more of our systems or facilities, or the inability of our employees to communicate in a largely work-from-home environment, for any reason could significantly impair our ability to perform critical business functions on a timely basis. In addition, many of our critical business systems interface with and depend on third-party systems.

We currently offer our products through our website and mobile app using third-party data centers and providers of cloud infrastructure services. We do not have control over the operations or facilities of these third parties. Such facilities are vulnerable to damage or interruption from human error, intentional bad acts, earthquakes, floods, fires, severe storms, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures, and similar events, many of which are beyond our control, any of which could disrupt our services, prevent customers from accessing our products, destroy customer data, or prevent us from being able to continuously back up and record data. In the event of significant physical damage to one of these data centers, it may take a significant period of time to achieve full resumption of our services, and our disaster recovery planning may not account for all eventualities. If the data centers we utilize or related systems fail to operate properly, or become disabled even for a brief period of time, we could suffer financial loss, a disruption of our business, liability to customers or damage to our reputation. We may not be able to easily switch our operations to another cloud or data center provider if there are disruptions or interference, and, even if we do switch our operations, other cloud and data center providers are subject to the same risks. Moreover, negative publicity arising from these types of disruptions could damage our reputation and may adversely impact use of our website and mobile app. 43

facilities, or the inability of our employees to communicate in a largely work-from-home environment, for any reason could significantly impair our ability to perform critical business functions on a timely basis. In addition, many of our critical business systems interface with and depend on third-party systems.

We currently offer our products through our website and mobile app using third-party data centers and a leading provider of cloud infrastructure services. We do not have control over the operations or facilities of these third parties. Such facilities are vulnerable to damage or interruption from human error, intentional bad acts, earthquakes, floods, fires, severe storms, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures, and similar events, many of which are beyond our control, any of which could disrupt our services, prevent customers from accessing our products, destroy customer data, or prevent us from being able to continuously back up and record data. In the event of significant physical damage to one of these data centers, it may take a significant period of time to achieve full resumption of our services, and our disaster recovery planning may not account for all eventualities. If the data centers we utilize or related systems fail to operate properly, or become disabled even for a brief period of time, we could suffer financial loss, a disruption of our business, liability to customers or damage to our reputation. We may not be able to easily switch our operations to another cloud or data center provider if there are disruptions or interference, and, even if we do switch our operations, other cloud and data center providers are subject to the same risks. Moreover, negative publicity arising from these types of disruptions could damage our reputation and may adversely impact the use of our website and mobile app.

We use technology and intellectual property licensed from unaffiliated third parties in certain of our products, and we may license additional third-party technology and intellectual property in the future. Any errors or defects in this third-party technology and intellectual property could result in errors that could harm our brand and business. In addition, licensed technology and intellectual property may not continue to be available on commercially reasonable terms, or at all.

Further, although we believe that there are currently adequate replacements for the third-party technology and intellectual property we presently use, the loss of our right to use any of this technology and intellectual property could result in delays in producing or delivering affected products until equivalent technology or intellectual property is identified, licensed or otherwise procured, and integrated. Our business would be disrupted if any technology and intellectual property we license from others or functional equivalents of this software were either no longer available to us or no longer offered to us on commercially reasonable terms or prices. In either case, we would be required ~~either~~ to attempt to redesign our products to function with technology and intellectual property available from other parties or to develop these components ourselves, which would result in increased costs and could result in delays in product sales and the release of new product offerings. Alternatively, we might be forced to limit the features available in affected products. We may not carry sufficient business interruption insurance, it may not be sufficient to compensate us for the potentially significant losses, including the potential harm to the future growth of our business that may result from interruptions in our services or products. Any of these results could harm our business, results of operations, ~~and~~ financial condition and prospects.

We are subject to payment processing risk.

We currently rely exclusively on one third-party vendor to provide payment processing services, including the processing of payments from credit cards and debit cards, and our business would be disrupted if this vendor refuses to provide these services to us and we are unable to find a suitable replacement on a timely basis or at all. If we or our processing vendor fail to maintain adequate systems for the authorization and processing of credit card transactions, it could cause one or more of the major credit card companies to disallow our continued use of their payment products. The failure to do so could result in contractual fines or disruption of our ability to receive credit card payments, harming our reputation and financial condition. Data security standards for merchants and service providers that accept credit card payments are prescribed by the PCI Security Standards Council, or PCI, an independent body formed by an association of the major credit card vendors. These standards are intended to promote a common set of data security measures to help ensure the safe handling of sensitive information by companies accepting credit card payments. The PCI data security standards, however, will likely evolve over time to address emerging payment security risks and other issues requiring additional compliance efforts by us. Our intention is to maintain compliance with PCI’s data security standards.

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~~independent~~The ~~body~~payment ~~formed~~methods bythat anwe ~~association~~offer ofalso ~~the~~subject ~~major~~us ~~credit~~to ~~card~~potential ~~vendors.~~fraud ~~These~~and ~~standards~~theft by criminals, who are ~~intended~~becoming increasingly sophisticated, seeking to ~~promote~~obtain aunauthorized ~~common~~access ~~set~~to ofor ~~data~~exploit ~~security~~weaknesses ~~measures~~that may exist in payment systems. If we fail to ~~help~~comply ~~ensure~~with applicable rules or requirements for the ~~safe~~payment ~~handling~~methods ofwe ~~sensitive~~accept, ~~information~~including bythe Payment Card Industry Data Security Standard, a self-regulatory standard that requires companies ~~accepting~~that ~~credit~~process payment card ~~payments.~~data ~~The~~to ~~PCI~~implement certain data security ~~standards~~measures, ~~however,~~or ~~will~~if ~~likely~~payment-related ~~evolve~~data ~~over~~are ~~time~~compromised due to ~~address~~a ~~emerging~~breach of data, we may be liable for significant costs incurred by payment ~~security~~card ~~risks~~issuing banks and other ~~issues~~third parties or subject to fines and higher transaction fees, ~~requiring~~or ~~additional~~our ~~compliance~~ability ~~efforts~~to byaccept usor facilitate certain types of payments may be impaired. ~~Our~~In ~~intention~~addition, isour customers could lose confidence in certain payment types, which may result in a shift to ~~maintain~~other ~~compliance~~payment ~~with~~types ~~PCI’s~~or ~~data~~potential ~~security~~changes ~~standards~~to our payment systems that may result in higher costs. If we fail to adequately control fraudulent credit card transactions, we may face civil liability, diminished public perception of our security measures, and significantly higher credit card-related costs, each of which could harm our business, results of operations, financial condition and prospects.

The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in payment systems. If we fail to comply with applicable rules or requirements for the payment methods we accept, including the Payment Card Industry Data Security Standard, a self-regulatory standard that requires companies that process payment card data to implement certain data security measures, or if payment-related data are compromised due to a breach of data, we may be liable for significant costs incurred by payment card issuing banks and other third parties or subject to fines and higher transaction fees, or our ability to accept or facilitate certain types of payments may be impaired. In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs. If we fail to adequately control fraudulent credit card transactions, we may face civil liability, diminished public perception of our security measures, and significantly higher credit card-related costs, each of which could harm our business, results of operations and financial condition.

Our success depends upon the insurance industry continuing to move online at its current pace and the continued growth and acceptance of online and mobile app-based products and services as effective alternatives to traditional offline products and services.

We provide automobile and renters insurance products primarily through our websites, mobile ~~apps~~app, and partnership channel, including our embedded insurance product and our independent agent platform, which compete with traditional offline insurance counterparts. We believe that the continued growth and acceptance of online products and services as well as those offered through mobile devices generally will depend, to a large extent, on the continued growth in commercial use of the internet and mobile apps, and the continued migration of traditional offline markets and industries online.

Purchasers of insurance may develop the perception that purchasing insurance products online or through a mobile app is not as effective as purchasing such products through a broker or other traditional offline methods, and the insurance market may not migrate online as quickly as (or at the levels that) we ~~expect~~prefer. Moreover, if, for any reason, an unfavorable perception generally develops that telematics, mobile engagement, a technology-based platform, artificial intelligence and/or bots are less efficacious than traditional offline methods of purchasing insurance, underwriting, claims processing, and other functions that do not use data automation, artificial intelligence and/or bots, or that our processes lead to unfair outcomes, our business, results of operations, ~~and~~ financial condition and prospects could be adversely affected.

Our actual incurred losses and LAE may be greater than our loss and LAE reserves, which could have a material adverse effect on our ~~financial~~business, ~~condition and~~ results of operations, financial condition and prospects.

Our financial condition and results of operations depend on our ability to accurately price risk and assess potential losses and LAE under the terms of the policies we underwrite. Reserves do not represent an exact calculation of the unpaid claims liability. Rather, reserves represent an estimate of what the expected ultimate settlement and administration of claims will cost, and the ultimate liability may be greater or less than the current estimate. In our industry, there is always the risk that reserves may prove inadequate or redundant since we will likely misestimate the cost of claims and claims administration.

We base our estimates on our assessment of known facts and circumstances, as well as estimates of future trends in claim severity, claim frequency, judicial theories of liability, and other factors. These variables are affected by both internal and external events that could increase our exposure to losses, including changes in actuarial projections, claims handling procedures, inflation, severe weather, economic and judicial trends and legislative and regulatory changes. Moreover, changing climate conditions, whether due to global climate change or other causes, may increase how often severe weather events and other natural disasters occur, how long they last, and how much insured damage they cause, and may change where the events occur. We regularly monitor reserves using new information on reported claims and a variety of statistical techniques to update our current estimate. Our estimates could prove to be inadequate, and this underestimation could have a material adverse effect on our business, results of operations, financial condition and prospects.

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could prove to be inadequate, and this underestimation could have a material adverse effect on our financial condition.

Recorded claim reserves, including case reserves, salvage and subrogation and incurred but not reported, or IBNR, claims reserves, are based on our estimates of losses after considering known facts and interpretations of the circumstances, including settlement agreements. Additionally, models that rely on the assumption that past loss development patterns will persist into the future are used. Internal factors are considered including our experience with similar cases, actual claims paid, historical trends involving claim payment patterns, pending levels of unpaid claims, loss management programs, product mix, state mix, contractual terms, industry payment and reporting patterns, and changes in claim reporting, and settlement practices. External factors are also considered, such as court decisions, changes in law and litigation imposing unintended coverage. We also consider benefits, such as requiring the availability of multiple limits for a single loss occurrence. Regulatory requirements and economic conditions are also considered.

Since reserves are estimates of the unpaid portion of losses and expenses for events that have occurred, including IBNR losses, the establishment of appropriate reserves, including reserves for catastrophes, is an inherently uncertain and complex process that is regularly refined to reflect current estimation processes and practices. The ultimate cost of losses may vary materially from recorded reserves and such variance may adversely affect our business, results of operations, ~~and~~ financial condition and prospects as the reserves and reinsurance recoverables are reestimated.

If any of our insurance reserves should prove to be inadequate for the reasons discussed above, or for any other reason, we will be required to increase reserves, resulting in a reduction in our net income and stockholders’ equity in the period in which the deficiency is identified. Future loss experience substantially in excess of established reserves could also have a material adverse effect on future earnings and liquidity and financial rating, which would affect our ability to attract new business or to retain existing customers.

Performance of our investment portfolio is subject to a variety of investment risks that may adversely affect our financial results.

Our results of operations depend, in part, on the performance of our investment portfolio. We seek to hold a diversified portfolio of investments in accordance with our investment policy, which is routinely reviewed by the Audit, Risk and Finance Committee. However, our investments are subject to general economic and market risks as well as risks inherent to particular securities and classes of securities.

Our primary market risk exposures are to changes in interest rates. See the section titled “Quantitative and Qualitative Disclosures about Market Risk” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~—Quantitative and Qualitative Disclosures about Market Risk~~.” In recent years, interest rates have been at or near historic lows although rates have been slightly higher of late. A protracted low interest rate environment would place pressure on our net investment income, particularly as it relates to fixed income securities and short-term investments, which, in turn, may adversely affect our operating results. Future increases in interest rates could cause the values of our fixed income securities portfolios to decline, with the magnitude of the decline depending on the maturity of the securities included in our portfolio and the amount by which interest rates increase. Some fixed income securities have call or prepayment options, which create possible reinvestment risk in declining rate environments. Other fixed income securities, such as ~~mortgage-backed and~~ asset-backed securities, carry prepayment risk or, in a rising interest rate environment, may not prepay as quickly as expected.

The value of our investment portfolio is subject to the risk that certain investments may default or become impaired due to deterioration in the financial condition of one or more issuers of the securities we hold, or due to deterioration in the financial condition of an insurer that guarantees an issuer’s payments on such investments. Downgrades in the credit ratings of fixed maturities also have a significant negative effect on the market valuation of such securities.

Such factors could reduce our net investment income and result in realized investment losses. Our investment portfolio is subject to increased valuation uncertainties when investment markets are illiquid. The valuation of investments is more subjective when markets are illiquid, thereby increasing the risk that the estimated fair value (i.e., the carrying amount) of the securities we hold in our portfolio does not reflect prices at which actual transactions would occur.

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~~(i.e.,~~Risks for all types of securities are managed through the ~~carrying~~application ~~amount)~~of our investment policy, which establishes investment parameters that include, but are not limited to, maximum percentages of investment in certain types of securities and minimum levels of credit quality, which we believe are within applicable guidelines established by the NAIC. The maximum percentage and types of securities we ~~hold~~may invest in ~~our~~are ~~portfolio~~subject ~~does~~to ~~not~~insurance ~~reflect~~laws ~~prices~~and atregulations, which ~~actual~~may ~~transactions~~and ~~would~~do ~~occur~~change. Failure to comply with these laws and regulations would cause non-conforming investments to be treated as non-admitted assets for purposes of measuring statutory surplus and, in certain circumstances, we would be required to dispose of such investments.

~~Risks~~Although ~~for~~we ~~all~~seek ~~types~~to ofpreserve ~~securities are managed through the application of~~ our ~~investment policy~~capital, ~~which~~we ~~establishes~~cannot ~~investment~~guarantee ~~parameters~~ that ~~include,~~our ~~but~~investment ~~are~~objectives ~~not~~will ~~limited~~be toachieved, ~~maximum~~and ~~percentages~~results ofmay ~~investment~~vary insubstantially ~~certain~~over ~~types~~time. ofIn ~~securities and minimum levels of credit quality~~addition, ~~which~~although we ~~believe~~seek ~~are~~to ~~within~~employ ~~applicable~~investment ~~guidelines~~strategies ~~established~~that byare ~~the~~not ~~NAIC.~~correlated ~~The~~with ~~maximum~~our ~~percentage~~insurance and ~~types~~reinsurance ofexposures, ~~securities~~losses ~~we may invest~~ in ~~are~~our ~~subject~~investment toportfolio ~~insurance laws and regulations, which~~ may ~~change.~~occur ~~Failure~~at tothe ~~comply~~same ~~with~~time ~~these laws and regulations would cause non-conforming investments to be treated~~ as ~~non-admitted~~underwriting ~~assets~~losses ~~for purposes of measuring statutory surplus~~ and, ~~in certain circumstances~~therefore, weexacerbate ~~would~~the beadverse ~~required~~effect toof ~~dispose~~the oflosses ~~such~~on ~~investments~~us.

Although we seek to preserve our capital, we cannot be certain that our investment objectives will be achieved, and results may vary substantially over time. In addition, although we seek to employ investment strategies that are not correlated with our insurance and reinsurance exposures, losses in our investment portfolio may occur at the same time as underwriting losses and, therefore, exacerbate the adverse effect of the losses on us.

The inability to access our cash accounts or to convert investments into cash on favorable terms when we desire to do so may materially and adversely affect our business, cash flows and capital position.

We rely on our ability to access our cash accounts at banks and other financial institutions to operate our business. If we are unable to access the cash in those accounts as needed, whether due to our own systems difficulties, an institution-specific issue at the bank or financial institution (such as a bank failure, cybersecurity ~~breach~~incident, severe weather or other catastrophe impacting their operations), a broader disruption in banking, financial or wire transfer systems, or otherwise, our ability to pay insurance claims and other financial obligations when due and otherwise operate our business could be materially adversely affected. In the recent past, certain banks, including a bank utilized by the Company, have failed and depositors, including the Company, were unable to access funds in those banks for a period of time. Likewise, our investment portfolios are subject to risks inherent in the nation’s and world’s capital markets, including the ~~United~~U.S. ~~States~~ continuing to honor its outstanding debt and other obligations. Any disruption in the functioning of those markets or in our ability to liquidate investments or specific categories of investments on favorable terms when desired, or a default by the ~~United~~U.S. ~~States~~ in its obligations, could impair our ability to pay claims or other financial obligations when due and could result in a significant decline in the value of our investment portfolio and have a material adverse impact on our cash flows and capital position. Any such event or series of such events could also result in significant operational difficulties, reputational harm and adverse actions by regulators and have a material adverse effect on our ~~financial condition~~business, ~~cash~~results ~~flows~~of operations, ~~and~~financial ~~results~~condition ofand ~~operations~~prospects.

Unexpected changes in the interpretation of our coverage or provisions, including loss limitations and exclusions, in our policies could have a material adverse effect on our financial condition and results of operations.

There can be no ~~assurances~~guarantees that specifically negotiated loss limitations or exclusions in our policies will be enforceable in the manner we or our customers intend, or at all. As industry practices and legal, judicial, social, and other conditions change, unexpected and unintended issues related to claims and coverage may emerge. For example, many of our policies limit the period during which a customer may bring a claim, which may be shorter than the statutory period under which such claims can be brought against our customers. While these limitations and exclusions help us assess and mitigate our loss exposure, it is possible that a court or regulatory authority could nullify or void a limitation or exclusion, or legislation could be enacted modifying or barring the use of such limitations or exclusions. These types of governmental actions could result in higher than anticipated losses and LAE, which could have a material adverse effect on our ~~financial~~business, ~~condition or~~ results of operations, financial condition or prospects. In addition, court decisions, such as the 1995 Montrose decision in California could read policy exclusions ~~narrowly~~ so as to expand coverage, thereby requiring insurers to create and write new exclusions. Under insurance laws, the insurer typically has the burden of proving an exclusion applies and any ambiguities in the terms of a loss limitation or exclusion provision are typically construed against the insurer. These issues may adversely affect our business by either broadening coverage beyond our underwriting intent, or by increasing the frequency or severity of claims or both. In some instances, these changes may not become apparent until sometime after we have issued insurance contracts that are affected by the changes. As a result, the full extent of liability under our insurance contracts may not be known for many years after a contract is issued and may subject us to aggregated class action litigation.

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Risks Related to Ownership of Our Class A Common Stock

Failure to meet the continued listing requirements of Nasdaq could result in delisting of our Class A common stock, which in its turn would negatively affect the price of our Class A common stock and limit investors’ ability to trade in our common stock.

Our common stock trades on Nasdaq. Nasdaq rules impose certain continued listing requirements, including the minimum $1 bid price, corporate governance standards and number of public stockholders. If we fail to meet these continued listing requirements, Nasdaq may take steps to delist our Class A common stock. If our Class A common stock is delisted from The Nasdaq Global Select Market, we could face significant material adverse consequences, including:

•a limited availability of market quotations for our Class A common stock;

•a reduced liquidity with respect to our Class A common stock;

•a determination that shares of our Class A common stock are a “penny stock,” which will require broker-dealers trading in our Class A common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our Class A common stock;

•a limited amount of news and analyst coverage for our company; and

•a limited ability to issue additional securities or obtain additional financing in the future.

The dual class structure of our common stock will have the effect of concentrating voting control with our executive officers, directors and their affiliates, which will limit your ability to influence the outcome of important transactions.

Our Class B common stock has ten votes per share and our Class A common stock has one vote per share. As of February 1519, ~~2024~~2025, holders of our Class B common stock collectively beneficially own shares representing approximately 8277.90% of the voting power of our outstanding capital stock. Our directors and executive officers and their affiliates collectively beneficially own, in the aggregate, shares representing approximately 1821.24% of the voting power of our outstanding capital stock. As a result, the holders of our Class B common stock are able to exercise considerable influence over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or our assets, even if their stock holdings represent less than 50% of the outstanding shares of our capital stock. This concentration of ownership limits the ability of other stockholders to influence corporate matters and may cause us to make strategic decisions that could involve risks to you or that may not be aligned with your interests. This control may adversely affect the market price of our Class A common stock.

Further, future transfers by holders of our Class B common stock will generally result in those shares converting into shares of our Class A common stock, subject to limited exceptions, such as certain transfers effected for tax or estate planning purposes. The conversion of shares of our Class B common stock into shares of our Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock, including our directors and executive officers and their affiliates, who retain their shares in the long term.

Applicable insurance laws may make it difficult to effect a change of control.

Under applicable state insurance laws and regulations, no person may acquire “control” of aan ~~domestic~~ insurer until written approval is obtained from the state insurance commissioner. Applicable law provides for a rebuttable presumption of “control” by any person which owns or acquires, directly or indirectly, 10% or more of the voting stock of the insurance company, and a person must seek regulatory approval from the superintendent of the supervisory DOI prior to acquiring direct or indirect “control” of aan ~~domestic~~ insurer by filing a Form A Statement Regarding the Acquisition of Control of or Merger with a Domestic Insurer, or Form A. As part of this Form A application, the entity acquiring control (as well as any controlling shareholders of such entity) will need to submit, along with other documents and disclosures, its financial statements, organizational charts and biographical affidavits for any officers, directors and controlling shareholders of each applicable entity. Would-be acquirers may find these

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~~find these~~ requirements burdensome, which could deter potential acquisition proposals and may serve to delay or prevent change of control transactions, including transactions that some or all of the stockholders might consider to be desirable. These requirements may also inhibit our ability to acquire an insurance company should we wish to do so in the future.

We do not intend to pay dividends on our Class A common stock so any returns will be limited to the value of our stock.

We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Additionally, we are a holding company that transacts a majority of our business through operating subsidiaries. Consequently, our ability to pay dividends to stockholders is largely dependent on receipt of dividends and other distributions from our subsidiaries. As addressed above, applicable insurance laws restrict the ability of our regulated insurance ~~subsidiary~~subsidiaries to declare extraordinary stockholder dividends and require insurance companies to maintain specified levels of statutory capital and surplus. Insurance regulators have broad powers to prevent reduction of statutory surplus to inadequate levels, and there is no ~~assurance~~guarantee that dividends of the maximum amounts calculated under any applicable formula would be permitted. State insurance regulatory authorities that have jurisdiction over the payment of dividends by our regulated insurance subsidiary may in the future adopt statutory provisions more restrictive than those currently in effect. Any return to stockholders will therefore be limited to the appreciation of their stock.

As a public company, we are subject to more stringent federal and state law requirements. We ~~will~~ incur significant increased costs as a result of operating as a public company, and our management ~~will~~devotes ~~be required to devote~~ substantial time to ~~new~~ compliance initiatives.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of Nasdaq, and other applicable securities rules and regulations. Compliance with these rules and regulations have and may continue to increase our legal, accounting, investor relations, financial and other costs and expenses, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. In addition, the Sarbanes-Oxley Act and rules subsequently implemented by the SEC and Nasdaq have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Stockholder activism, the current political environment and the current high level of U.S. government intervention and regulatory reform may also lead to substantial new regulations and disclosure obligations, which may in turn lead to additional compliance costs and impact the manner in which we operate our business in ways we do not currently anticipate. Our management and other personnel devote a substantial amount of time to comply with these requirements. Moreover, these requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. Being a public company and the associated rules and regulations make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain adequate coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our Audit, Risk and Finance Committee and Compensation Committee, and qualified executive officers.

~~Increasing~~Actions ~~scrutiny, actions~~ and changing expectations from investors, clients, regulators and our employees with respect to environmental, social and governance ~~(“ESG”)~~ matters may impose additional costs on us, impact our access to capital, or expose us to new or additional risks.

~~Increased~~Changing ~~focus~~expectations, including from governmental organizations, investors, employees and clients, on ~~ESG~~environmental, social and governance matters such as environmental stewardship, climate change, diversity, equity and inclusion, pay equity, racial justice, workplace conduct and cybersecurity and data privacy, may result in increased costs (including but not limited to increased costs related to compliance and stakeholder engagement), impact our reputation, or otherwise affect our business performance. ~~Negative~~Conflicting ~~public perception~~environmental, ~~adverse publicity or negative comments in~~ social ~~media could damage our reputation or harm our relationships with regulators~~ and ~~the communities in which we operate, if we do~~

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governance policies within jurisdictions, such as between federal and some state policies in the U.S., is leading to a complex and fragmented regulatory environment, which may be difficult to navigate and we may not effectively anticipate or respond to regulatory changes. Negative public perception, adverse publicity or negative comments in social media could damage our reputation or harm our relationships with regulators, investors and the communities in which we operate, if we do not, or are not perceived to, adequately address these issues, including if we fail to demonstrate progress towards any current or future ~~ESG~~environmental, social and governance goals. Any harm to our reputation could negatively impact employee engagement and retention and the willingness of customers to do business with us. We could also incur additional costs and require additional resources to monitor, report, and comply with various environmental, social and governance practices.

~~ESG~~In ~~matters~~addition, a variety of organizations have ~~been~~developed ratings to measure the ~~subject~~performance of ~~increased~~companies ~~focus~~on byenvironmental, ~~certain~~social ~~regulators~~and governance topics, and the results of some of these assessments are widely publicized. ~~Conflicting~~Such ~~ESG~~ratings ~~policies~~are ~~within~~used ~~jurisdictions~~by some investors to inform their investment and voting decisions. In addition, ~~such~~many asinvestors ~~between~~have ~~federal~~created their own proprietary ratings that inform their investment and ~~some~~voting ~~state~~decisions. ~~policies~~Unfavorable inratings of the ~~U.S.~~Company or our industry, isas ~~leading~~well as omission of inclusion of our stock into environmental, social and governance oriented investment funds may lead to anegative ~~complex~~investor sentiment and ~~fragmented~~the ~~regulatory~~diversion ~~environment~~of investment to other companies or industries, which ~~may~~could behave ~~difficult~~a negative impact on our stock price and our access to ~~navigate~~and cost of capital.

It is possible that stakeholders may not be satisfied with our ESG practices or the speed of their adoption. At the same time, certain stakeholders might not be satisfied that we have adopted ESG practices at all. Actual or perceived shortcomings with respect to our ESG practices and reporting could negatively impact our business. We could also incur additional costs and require additional resources to monitor, report, and comply with various ESG practices.

In addition, a variety of organizations have developed ratings to measure the performance of companies on ESG topics, and the results of some of these assessments are widely publicized. Such ratings are used by some investors to inform their investment and voting decisions. In addition, many investors have created their own proprietary ratings that inform their investment and voting decisions. Unfavorable ratings of the Company or our industry, as well as omission of inclusion of our stock into ESG-oriented investment funds may lead to negative investor sentiment and the diversion of investment to other companies or industries, which could have a negative impact on our stock price and our access to and cost of capital.

If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired, investors may lose confidence in our financial reporting and the trading price of our Class A common stock may decline.

Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to furnish a report by our management on our internal control over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management does not expect that our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable assurance, not absolute assurance, that the control system’s objective will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our Company will have been detected.

WeThere ~~identified~~can ~~and~~be ~~disclosed~~no assurance that there will not be material weaknesses in our internal control ~~deficiencies~~over asfinancial ofreporting ~~December~~in 31the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, ~~2022~~results ~~that~~of ~~constituted~~operations aor ~~material~~cash ~~weakness~~flows. WeIf ~~determined~~we are unable to conclude that ~~there~~our ~~were~~internal control ~~deficiencies~~over ~~within~~financial ~~monitoring~~reporting ~~controls~~is ~~and~~effective in the ~~control environment~~future, ~~including~~or ~~the~~if ~~circumvention~~our ofindependent ~~control~~registered ~~activities~~public accounting firm determines that ~~aggregated~~we tohave a material weakness. Wein ~~have~~our ~~taken~~internal ~~action~~control toover ~~remediate~~financial ~~the~~reporting, ~~material~~investors ~~weakness~~may lose confidence in the accuracy and ~~management~~completeness ~~has~~of ~~concluded~~our ~~that~~financial reports, the ~~material~~market ~~weakness~~price ~~was~~of ~~remediated~~our asClass ofA ~~December~~common ~~31,~~stock ~~2023.~~could ~~For~~decline ~~more~~and ~~information~~we ~~regarding~~could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, ~~refer~~or to ~~Part~~implement IIor ~~Item~~maintain 9Aother effective control systems required of public companies, ~~“Controls~~could ~~and~~also ~~Procedures~~restrict our future access to capital markets.”

~~There~~To ~~can~~comply bewith nothe ~~assurance~~Sarbanes-Oxley ~~that~~Act, ~~there~~the ~~will~~requirements ~~not~~of bebeing ~~material~~a ~~weaknesses~~reporting incompany ~~our~~under ~~internal~~the ~~control~~Exchange ~~over~~Act ~~financial~~and ~~reporting~~any complex accounting rules in the future., ~~Any~~we ~~failure~~may need to ~~maintain~~upgrade ~~internal~~our ~~control~~information ~~over~~technology ~~financial~~systems; ~~reporting~~implement ~~could~~additional ~~severely~~financial ~~inhibit~~and ~~our~~management ~~ability~~controls, toreporting ~~accurately~~systems ~~report~~and ~~our~~procedures; ~~financial~~and ~~condition,~~hire ~~results~~additional ofaccounting ~~operations~~and orfinance ~~cash flows~~staff. If we are unable to ~~conclude~~hire ~~that our internal control over financial reporting is effective in~~ the ~~future,~~additional ~~or if our independent registered public~~ accounting ~~firm~~and ~~determines~~finance ~~that~~staff wenecessary ~~have~~to acomply ~~material~~with ~~weakness~~these ~~in our internal control over financial reporting~~requirements, ~~investors~~we may ~~lose~~need ~~confidence~~to inretain ~~the~~additional ~~accuracy~~outside ~~and~~consultants. ~~completeness~~If ~~of our financial reports, the market price of our Class A common stock could decline and~~ we ~~could be subject to sanctions~~ or ~~investigations~~our byauditors ~~Nasdaq,~~are ~~the~~unable ~~SEC or other regulatory authorities. Failure~~ to ~~remedy any material weakness in our internal control over financial reporting,~~

4750

orconclude tothat ~~implement~~our orinternal ~~maintain~~control ~~other~~over financial reporting is effective, ~~control~~investors ~~systems~~may ~~required~~lose ofconfidence ~~public~~in ~~companies,~~our ~~could~~financial ~~also~~reporting ~~restrict~~and the trading price of our ~~future~~Class ~~access~~A tocommon ~~capital~~stock ~~markets~~may decline.

To comply with the Sarbanes-Oxley Act, the requirements of being a reporting company under the Exchange Act and any complex accounting rules in the future, we may need to upgrade our information technology systems; implement additional financial and management controls, reporting systems and procedures; and hire additional accounting and finance staff. If we are unable to hire the additional accounting and finance staff necessary to comply with these requirements, we may need to retain additional outside consultants. If we or, our auditors are unable to conclude that our internal control over financial reporting is effective, investors may lose confidence in our financial reporting and the trading price of our Class A common stock may decline.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions also could limit the price that investors might be willing to pay in the future for shares of our Class A common stock, thereby depressing the market price of our Class A common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:

•establish a classified board of directors such that not all members of the board are elected at one time;

•allow the authorized number of our directors to be changed only by resolution of our board of directors;

•limit the manner in which stockholders can remove directors from the board;

•establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors;

•require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;

•prohibit our stockholders from calling a special meeting of our stockholders;

•authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a stockholder rights plan, or so-called “poison pill,” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and

•require the approval of the holders of at least 66 2⁄3% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our charter or bylaws.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or DGCL, which prohibits a person who owns 15% or more of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired 15% or more of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. These provisions could discourage potential acquisition proposals and could delay or prevent a change in control transaction. They could also have the effect of discouraging others from making tender offers for our Class A common stock, including transactions that may be in your best interests. These provisions may also prevent changes in our management or limit the price that investors are willing to pay for our stock.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify our directors and officers, in each case, to the fullest extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for any breach of fiduciary duties as directors, except liability for:

•any breach of the director’s duty of loyalty to the corporation or its stockholders;

•any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

•unlawful payments of dividends or unlawful stock repurchases or redemptions; or

•any transaction from which the director derived an improper personal benefit.

Such limitation of liability does not apply to liabilities arising under federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.

Our amended and restated bylaws provide that we are required to indemnify our directors and officers to the fullest extent permitted by Delaware law and may indemnify our other employees and agents. Our amended and restated bylaws also provide that, on satisfaction of certain conditions, we will advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the provisions of Delaware law. We have entered and expect to continue to enter into agreements to indemnify our directors and executive officers. With certain exceptions, these agreements provide for indemnification for related expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in connection with any action, proceeding or investigation. We believe that these amended and restated certificate of incorporation and amended and restated bylaws provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers.

While we maintain directors’ and officers’ liability insurance, such insurance may not be adequate to cover all liabilities that we may incur, which may reduce our available funds to satisfy third-party claims and may adversely impact our cash position.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the ~~United~~U.S. ~~States of America~~ are the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our amended and restated certificate of incorporation ~~provide~~provides that the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) is the exclusive forum for the following claims or causes of action under Delaware statutory or common law:

•any derivative claim or cause of action brought on our behalf;

•any claim or cause of action for breach of a fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders;

•any claim or cause of action against us or any of our current or former directors, officers or other employees, arising out of or pursuant to any provision of the DGCL, our certificate of incorporation or our bylaws;

•any claim or cause of action seeking to interpret, apply, enforce or determine the validity of our certificate of incorporation or our bylaws;

•any action or proceeding as to which the DGCL confers jurisdiction to the Court of Chancery of the State of Delaware; and

•any claim or cause of action against us or any of our current or former directors, officers or other employees that is governed by the internal-affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court having personal jurisdiction over the indispensable parties named as defendants.

This provision would not apply to claims or causes of action brought to enforce a duty or liability created by the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction, or the Securities Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.52

This provision would not apply to claims or causes of action brought to enforce a duty or liability created by the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction, or the Securities Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation provides that the federal district courts of the U.S. will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business.

Risks Related to Our Indebtedness

Our Amended Term Loan includes a floating interest rate that exposes us to interest rate risk, and the terms of our Amended Term Loan place restrictions on our operating and financial flexibility. Our failure to comply with covenants contained in the Amended Term Loan may result in acceleration of our repayment obligations, which could harm our liquidity, financial condition, operating results, business and prospects and cause the price of our Class A common stock to decline.

Root is a party to a ~~five-year~~ term loan agreement by and among Root, Caret Holdings, Inc., or Caret, as borrower, and other subsidiary loan parties, the lenders party thereto, or the Lenders, and Acquiom Agency Services LLC, as the administrative agent for the Lenders, or the Term Loan. The Term Loan was initially entered into in January 2022 and was amended in October 2024, ~~pursuant~~or tothe ~~which~~Amended Term Loan. Under the terms of the Amended Term Loan, Caret has borrowed a principal amount of $~~300~~200 million, all of which is currently outstanding. Interest is determined on a floating interest rate calculated on the Secured Overnight Financing Rate, or SOFR, with a 1.0% floor, plus 9an applicable margin ranging from 5.25% to 6.00%, based upon the debt-to-capital ratio payable quarterly. Rising interest rates have an adverse impact on the cost of debt and results in less cash available to utilize in our operations, and could have a material adverse effect on our business and financial condition.

The Amended Term Loan includes limitations that restrict and limit, among other things, our ability to incur other indebtedness and liens, make restricted payments and investments, transfer or sell certain assets, engage in transactions with affiliates, and includes covenants requiring our cash and cash equivalents held in entities other than our insurance subsidiaries to be at least $~~200~~50 million at all times., ~~This~~direct ~~threshold~~contribution ~~may~~margin beon ~~reduced~~a torolling ~~$150~~twelve ~~million~~months ~~under~~to ~~two~~be ~~sets~~at ofleast ~~circumstances:~~20% ~~issuing~~at ~~62,500~~the ~~insurance~~end ~~policies~~of ~~through~~each ~~our~~fiscal ~~Carvana~~quarter ~~embedded product~~ and ~~achieving~~the asurplus ~~ratio~~ of ~~direct~~our ~~contribution~~insurance subsidiaries to ~~gross~~be ~~premiums~~at ~~earned~~least of$125.0 ~~12%;~~million orat ~~ceasing~~the ~~any~~end ~~customer acquisition spend outside~~ of ~~the~~each ~~Carvana~~fiscal ~~agreement and reducing our monthly cash burn to no greater than $12 million~~quarter.

50The Amended Term Loan also contains customary events of default, including, among others, payment default, bankruptcy events, cross-default, breaches of covenants and representations and warranties, change of control and judgment defaults. A breach of any of these covenants could result in default under our Amended Term Loan, which could prompt lenders to declare all amounts outstanding under the Amended Term Loan to be immediately due and payable. A repayment of our debt would materially reduce our cash position and may cause insurance regulators to review our financial condition and require us to take actions to raise additional funds via equity or debt, which may be at less favorable terms than under the Amended Term Loan. If we do not have sufficient cash or reserves, insurance regulators could take regulatory action. If we were unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure that indebtedness. An acceleration of our outstanding indebtedness could have serious consequences to our financial condition, operating results, and business.

The Term Loan also contains customary events of default, including, among others, payment default, bankruptcy events, cross-default, breaches of covenants and representations and warranties, change of control and judgment defaults. A breach of any of these covenants could result in default under our Term Loan, which could prompt lenders to declare all amounts outstanding under the Term Loan to be immediately due and payable. A repayment of our debt would materially reduce our cash position and may cause insurance regulators to review our financial condition and require us to take actions to raise additional funds via equity or debt, which may be at less favorable terms than under the Term Loan. If we do not have sufficient cash or reserves, insurance regulators could take regulatory action. If we were unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure that indebtedness. An acceleration of our outstanding indebtedness could have serious consequences to our financial condition, operating results, and business. 53

General Risk Factors

Significant stockholders may attempt to effect changes at our company or acquire control over our company, which could impact the pursuit of business strategies and adversely affect our results of operations and financial condition.

Our stockholders may from time to time engage in proxy solicitations, advance stockholder proposals or otherwise attempt to effect changes or acquire control over our company. Campaigns by stockholders to effect changes at publicly traded companies are sometimes led by investors seeking to increase short-term stockholder value through actions such as financial restructuring, increased debt, special dividends, stock repurchases or sales of assets or the entire company. Responding to proxy contests and other actions by activist stockholders can be costly and time-consuming and could divert the attention of our board of directors and senior management from the management of our operations and the pursuit of our business strategies. As a result, stockholder campaigns could adversely affect our business, results of operations, ~~and~~ financial condition and prospects.

Future acquisitions or investments could disrupt our business and harm our financial condition.

In the future we may pursue acquisitions or investments that we believe will help us achieve our strategic objectives. There is no ~~assurance~~guarantee that such acquisitions or investments will perform as expected or will be successfully integrated into our business or generate substantial revenue, and we may overestimate cash flow, underestimate costs or fail to understand the risks of or related to any investment or acquired business. The process of acquiring a business, product or technology can also cause us to incur various expenses and create unforeseen operating difficulties, expenditures and other challenges, whether or not those acquisitions are consummated, such as:

•intense competition for suitable acquisition targets, which could increase prices and adversely affect our ability to consummate deals on favorable or acceptable terms;

•inadequacy of reserves for losses and LAE;

•failure or material delay in closing a transaction, including as a result of regulatory review and approvals;

•regulatory conditions attached to the approval of the acquisition and other regulatory hurdles;

•a need for additional capital that was not anticipated at the time of the acquisition;

•anticipated benefits not materializing or being lower than anticipated;

•diversion of management time and focus from operating our business to addressing acquisition integration challenges;

•transition of the acquired company’s customers;

•difficulties in integrating the technologies, operations, existing contracts and personnel of an acquired company;

•retention of employees or business partners of an acquired company;

•cultural challenges associated with integrating employees from the acquired company into our organization;

•integration of the acquired company’s accounting, management information, human resources and other administrative systems;

•the need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked effective controls, procedures and policies;

•coordination of product development and sales and marketing functions;

•theft of our trade secrets or confidential information that we share with potential acquisition candidates;

•risk that an acquired company or investment in new offerings cannibalizes a portion of our existing business;

•adverse market reaction to an acquisition;

•liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; and

•litigation or other claims in connection with the acquired company, including claims from terminated employees, users, former stockholders or other third parties.

If we are unable to address these difficulties and challenges or other problems encountered in connection with any future acquisition or investment, we might not realize the anticipated benefits of that acquisition or investment and we might incur unanticipated liabilities or otherwise suffer harm to our business generally.

To the extent that we pay the consideration for any future acquisitions or investments in cash, it would reduce the amount of cash available to us for other purposes. Future acquisitions or investments could also result in dilutive issuances of our equity securities or the incurrence of debt, contingent liabilities, amortization expenses, increased interest expenses or impairment charges against goodwill in our consolidated balance sheet, any of which could seriously harm our business.

We expect a number of factors to cause our results of operations to fluctuate on a quarterly and annual basis, which may make it difficult to predict our future performance.

Our revenue and results of operations could vary significantly from quarter to quarter and year to year and may fail to match periodic expectations as a result of a variety of factors, many of which are outside of our control. Our results may vary from period to period as a result of fluctuations in the number of customers purchasing our insurance products and renewing their agreements with us as well as fluctuations in the timing and amount of our expenses. In addition, the insurance industry is subject to its own cyclical trends and uncertainties, including extreme weather which is often seasonal and may result in volatility in claims reporting and payment patterns. Fluctuations and variability across the industry may also affect our revenue. As a result, comparing our results of operations on a period-to-period basis may not be meaningful, and the results of any one period should not be relied on as an indication of future performance. Our results of operations may not meet the expectations of investors or public market analysts who follow us, who may adversely change their recommendation regarding our stock or provide more favorable relative recommendations about our competitors, or decline or cease to cover the Company or fail to publish regular reports on us, any of which may adversely affect our stock price. In addition to other risk factors discussed in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-K, factors that may contribute to the variability of our quarterly and annual results include:

•our ability to attract new customers and retain existing customers, including in a cost-effective manner;

•our ability to accurately forecast revenue and losses and appropriately plan our expenses;

•the effects of changes in search engine placement and prominence;

•the effects of increased competition on our business;

•our ability to successfully maintain our position in and expand in existing markets as well as successfully enter new markets;

•our ability to protect our existing intellectual property and to create new intellectual property;

•our ability to maintain an adequate rate of growth and effectively manage that growth;

•our ability to keep pace with technology changes in the insurance, mobile and automobile industries;

•the success of our sales and marketing efforts;

•the success of our partnership channel, including our embedded insurance platform;

• the success of our agency channel, including our independent agent platform;

•costs associated with defending claims, including accident and coverage claims, intellectual property infringement claims, misclassifications and related judgments or settlements;

•the impact of, and changes in, governmental or other regulation affecting our business;

•the attraction and retention of qualified employees and key personnel;

•our ability to choose and effectively manage third-party service providers;

•our ability to identify and engage in joint ventures and strategic partnerships;

•the impact of litigation or other losses;

•the effect of increasing interest rates on our available cash;

•the effects of natural or man-made catastrophic events, including those caused by global climate change;

•the effectiveness of our internal controls; and

•changes in our tax rates or exposure to additional tax liabilities.

New or changing technologies, including those impacting personal transportation, could cause a disruption in our business model, which may materially impact our results of operations and financial condition.

If we fail to anticipate the impact on our business of changing technology, including automotive technology, our ability to successfully operate may be materially impaired. Our business could also be affected by potential technological changes, such as autonomous or partially autonomous vehicles or technologies that facilitate ride, car or home sharing, the more widespread adoption of electric vehicles (including potentially as a result of climate change or regulatory responses to it), or vehicles with built-in telematics features. Such changes could disrupt the demand for products from current customers, create coverage issues or impact the frequency or severity of losses, or reduce the size of the automobile insurance market, causing our business to decline. Since auto insurance constitutes substantially all of our business, we are more sensitive than other insurers and more adversely affected by trends that could decrease auto insurance rates or reduce demand for auto insurance over time. We may not be able to respond effectively to these changes, which could have a material effect on our results of operations and financial condition.

The COVID-19 pandemic caused disruption to our operations and future pandemics may negatively impact our business, key metrics, and results of operations in numerous ways that are unpredictable.

Our business was impacted by the effects of the outbreak of the novel strain of coronavirus, or COVID-19, which was declared a global pandemic in March 2020. Pandemics and governmental responses thereto could impact the economies of affected countries, including creating or exacerbating supply chain disruptions and inflation and negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates, and interest rates. It is possible that a pandemic and governmental responses thereto will cause increased inflation, an economic slowdown of potentially extended duration, as well as a global recession. The impact of the pandemic may also exacerbate the other risks described in these Risk Factors, and additional impacts may arise that we are not currently aware of, any of which could have a material effect on us. Pandemics and governmental responses thereto have resulted, and could further result in, an increase in costs associated with claims under our policies, including the cost to repair or replace vehicles, as well as an increase in the number of customers experiencing difficulty paying premiums, any one of which could have a material adverse effect on our business, results of operations, financial condition and prospects.

5356

impact of the pandemic may also exacerbate the other risks described in these Risk Factors, and additional impacts may arise that we are not currently aware of, any of which could have a material effect on us. Pandemics and governmental responses thereto have resulted, and could further result in, an increase in costs associated with claims under our policies, including the cost to repair or replace vehicles, as well as an increase in the number of customers experiencing difficulty paying premiums, any of which could have a material adverse effect on our business and results of operations.

Future sales of our Class A common stock in the public market by current shareholders could cause the market price of our Class A common stock to decline.

Sales of a substantial number of shares of our Class A common stock in the public market, or the perception that these sales might occur, could depress the market price of our Class A common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the timing of or the effect that such sales may have on the prevailing market price of our Class A common stock.

5457

Item 1B. Unresolved Staff Comments

None.

5558

Item 1C. Cybersecurity

The Company has processes in place designed to protect its information systems and to assess, identify and manage material risks from cybersecurity threats. Accordingly, the Company has designed and implemented an Information Security Program, designed to protect the confidentiality, integrity, and availability of its information systems and data (including nonpublic information in its possession, custody, or control), as well as to comply with privacy and Information Security Program requirements for insurers as set forth in applicable state laws and regulations. As part of the Information Security Program, the Company has implemented an information security and privacy training and awareness program for Root employees, which includes new-hire training, ongoing ~~monthly~~periodic training and regular phishing simulation and exercises. In addition, the Company has engaged third parties in connection with these processes.

The Company has engaged third parties to perform information security risk assessments and testing on a periodic basis. It also has engaged third parties to provide a variety of services, including providing hosted security products as well as services to support security incident detection and response activities. In order to identify and manage risk from third parties, the Company has implemented a third-party cybersecurity risk management program involving the assessment of information security risk related to the third-party, with consideration given to the inherent risk level, the adequacy of the third-party’s control environment to mitigate those risks, and areas of residual risk. The breadth and depth of the assessment activities are designed to be commensurate with the nature and scope of the services provided by the third party.

The oversight of the Company’s cybersecurity risk management processes are integrated into the Company’s enterprise risk management process. Our board of directors oversees an enterprise-wide approach to risk management, designed to support the achievement of organizational objectives, to improve long-term organizational performance and to enhance stockholder value. A fundamental part of risk management is not only understanding the most significant risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for a given company. The involvement of our full board of directors in reviewing our business is an integral aspect of its assessment of management’s tolerance for risk and also its determination of what constitutes an appropriate level of risk. In connection with its reviews of the operations of our business, the board of directors addresses the primary risks associated with our business including cybersecurity. In particular, our board of directors is committed to the prevention, timely detection and mitigation of the effects of cybersecurity threats or incidents.

We have experienced cybersecurity threats to our information technology infrastructure and have experienced cybersecurity ~~attacks~~incidents that have resulted in threat actors obtaining customer personal information, attempts to breach our systems, fraudulent activity and other ~~similar~~ incidents. As of the filing of this Annual Report on Form 10-K, we are not aware of any such incidents that have occurred since the beginning of ~~2023~~2024 that have materially affected, or are reasonably likely to materially affect, the Company, including its business strategy, results of operations or financial condition. However, future threats could materially affect our business strategy, results of operations or financial condition. Risks related to cybersecurity events are detailed in the section of this Annual Report on Form 10-K titled “Risk Factors—Risks Related to Our Business—~~Data~~Cybersecurity ~~security breaches~~incidents, or real or perceived errors, failures or bugs in our or our vendors’ systems, or our website or app could impair our operations, compromise our confidential information or our customers’ personal information, damage our reputation and brand, and harm our business, ~~and~~financial condition, operating results and prospects.”

Cybersecurity Governance

While our full board of directors has overall responsibility for risk oversight, it has delegated oversight of certain risks to its committees, including the oversight of risks from cybersecurity threats. The board of directors delegated the oversight of cybersecurity risks to the Audit, Risk and Finance Committee, which oversees controls for the Company’s major financial and security risk exposures. The board of directors, through the Audit, Risk and Finance Committee, oversees the design and implementation of the Information Security Program. The board of directors and the Audit, Risk and Finance Committee are informed about these risks through regular reports from the Chief Information Security Officer, or CISO, about the Information Security Program.

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Additionally, the board of directors is informed of material information security incidents, as needed, by the Computer Security Incident Response Team, which is led by the Company’s ~~Chief~~General ~~Legal Officer~~Counsel.

The ~~Information~~Company’s ~~Security~~CISO ~~group~~is ~~and senior leadership are~~ responsible for assessing and managing risks from cybersecurity threats. The ~~Information~~Company’s ~~Security~~CISO ~~group~~also isleads ~~led by~~ the ~~Company’s~~Information ~~CISO,~~Security ~~who~~group and is ~~also~~ responsible for the day-to-day management of the Information Security Program. Katelynn Sandy is the Company’s CISO and reports directly to the Company’s President and Chief Technology Officer. Ms. Sandy has an extensive background in cybersecurity, technology, and risk management across a variety of industries, including financial services, healthcare, and technology. Additionally, Ms. Sandy holds various information security certifications.

The Information Security group, senior leadership and the CISO are informed about and monitor the prevention, detection, mitigation, and remediation of cybersecurity incidents through the Information Security Program. At least quarterly, the CISO provides updates to the Audit, Risk and Finance Committee, which includes updates on the overall Information Security Program status and compliance, cybersecurity related risks, and recommended changes to the Information Security Program. Senior members of our Information Security and Internal Audit functions also provide detailed, regular reports on information security and privacy to the Audit, Risk and Finance Committee.

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Item 2. Properties

Our corporate headquarters is located in Columbus, Ohio, and consists of 43,228 square feet that we occupy under a lease agreement that expires in 2027, but which could be terminated early under certain circumstances. We lease all of our facilities and do not own any real property. We also sublease certain office space to the extent we no longer need that space for current and anticipated future needs. We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.

For additional information regarding our leases, refer to Note 8, “Leases,” in the Notes to Consolidated Financial Statements.

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Item 3. Legal Proceedings

From time to time, we are party to litigation and legal proceedings relating to our business operations. While the outcome of all legal actions is not presently determinable, except as noted in Note 13, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements, we do not believe that we are party to any current or pending legal action that could reasonably be expected to have a material adverse effect on our financial condition or results of operations and cash flows.

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Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information for Common Stock

Our Class A common stock is traded on ~~the~~The Nasdaq Global Select Market, or Nasdaq, under the symbol “ROOT.” Our Class A common stock began trading on Nasdaq on October 28, 2020. Prior to that date, there was no public trading market for our Class A common stock. Our Class B common stock is neither listed nor traded, but each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock and is automatically converted upon sale or transfer into one share of Class A common stock.

Holders of Record

As of February 1519, ~~2024~~2025, Root had 3837 common stockholders of record of Class A common stock. Because many of our shares of Class A common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

As of February 1519, ~~2024~~2025, Root had 4334 common stockholders of record of Class B common stock.

Dividend Policy

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

Issuer Purchases of Equity Securities

None.

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Item 6. [Reserved]

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” included elsewhere in this Annual Report on Form 10-K. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. This Management’s Discussion and Analysis does not discuss ~~2021~~2022 performance or a comparison of ~~2022~~2023 versus ~~2021~~2022 performance for select areas where we have determined the omitted information is not necessary to understand our current period financial condition, changes in our financial condition, or our results. The omitted information may be found in our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 filed with the Securities and Exchange Commission, or the SEC, on February 2221, ~~2023~~2024.

Overview

Root is a technology ~~company revolutionizing personal~~ insurance ~~with~~company afounded ~~pricing~~on ~~model~~the ~~based~~idea ~~upon~~that ~~fairness~~car ~~and~~insurance arates ~~modern~~should ~~customer~~be ~~experience.~~based ~~We operate~~ primarily aon ~~direct-to-consumer~~driving ~~model~~behaviors, innot ~~which~~demographics. weWe ~~currently~~are ~~acquire~~revolutionizing the ~~majority~~archaic ofcar ~~our~~insurance ~~customers~~industry ~~through~~using mobile ~~apps.~~technology Weand ~~are~~data ~~also~~science ~~focused~~to onoffer ~~expanding~~drivers ~~our partnership channel~~fair, ~~where~~personalized ~~we acquire customers using various means, including through embedded integrations~~rates.

We believe the Root advantage is derived from our unique ability to efficiently and effectively bind auto insurance policies quickly, through direct and partnership channels, aided by segmenting individual risk ~~based~~to onprice ~~complex~~better ~~behavioral~~drivers ~~data~~more ~~and proprietary telematics models~~fairly. Our customer experience is built for ease of use and a product offering made possible with our full-stack insurance structure. These are all uniquely integrated into a single cloud-based technology platform that captures the entire insurance value chain—from customer acquisition to underwriting to claims administration to ongoing customer engagement.

To scale the business, we aim to drive new customer growth and optimize unit economics by capitalizing on our two distribution channels: direct and ~~partnerships~~partnership. InThe ~~both~~direct ~~channels~~channel weefficiently ~~seek~~drives tovolume ~~optimize~~for ~~unit~~high ~~economics.~~intent ~~Loss~~customers, ~~ratios~~meeting ~~for~~ customers in ~~their~~platforms ~~initial~~that ~~term~~they ~~are~~use ~~generally~~extensively ~~higher~~such ~~than~~as insearch ~~subsequent~~engines ~~terms.~~or ~~Thus,~~select asmarketplace aplatforms ~~young~~while actively shopping for insurance. ~~company,~~The ~~our~~data ~~results~~science ~~are~~model ~~disproportionately~~seeks ~~weighted~~to ~~toward~~optimize ~~new~~bidding ~~customers.~~strategies Wethat ~~believe~~fine tunes our ~~data-~~prices ~~and~~to ~~technology-driven~~strike ~~approach~~a ~~allows~~balance ~~for~~between ~~rapid~~offering ~~response~~a tocompetitive ~~macroeconomic~~price ~~trends~~and ~~through~~achieving ~~quick,~~target ~~appropriate~~unit ~~rate actions~~economics. ~~Our~~The ~~ability~~partnership tochannel ~~continually~~provides ~~enhance~~differentiated ~~our~~access ~~underwriting~~to ~~and~~high ~~segmentation~~intent ~~capabilities~~customers, ~~has~~primarily ~~contributed~~in tothe ~~improvement~~automotive, infinancial ~~our~~services, ~~gross~~and ~~loss~~independent ~~ratios~~agent sectors. We ~~Our~~build ~~marketing~~upon ~~spend~~or iswithin ~~grounded~~the inmobile aand ~~disciplined~~web ~~data-science~~customer ~~approach,~~experiences ~~targeting~~of ~~customers~~distribution ~~that~~partners ~~align~~to ~~with~~reach ~~our~~a ~~lifetime~~captive ~~expected~~customer ~~returns.~~base ~~Over~~with ~~time~~an weembedded ~~expect~~solution, towhich ~~build~~can aeven ~~base~~remove ofthe ~~recurring~~need ~~customers~~for ~~with~~the ~~more~~customer ~~favorable~~to ~~loss~~ever ~~ratios,~~visit ~~resulting~~a inRoot ~~the~~website ~~following~~to ~~financial~~purchase ~~impacts:~~and bind a policy.

~~•Improved~~We ~~loss~~use ~~ratio.~~technology ~~Through~~to ~~improvements~~drive inefficiency ~~our~~across ~~pricing~~all functions, including distribution, underwriting, policy administration and ~~segmentation~~claims wein ~~have~~particular. ~~seen~~We ~~improvement~~believe our data- and technology-driven approach to ~~our~~pricing ~~gross~~and ~~loss~~underwriting ~~ratios.~~allows ~~Renewal~~for ~~premiums,~~rapid ~~referring~~response to ~~premiums~~macroeconomic ~~from~~trends athrough ~~customer’s~~quick, ~~second~~appropriate ~~term~~rate ~~and~~actions. ~~beyond,~~Through ~~have~~continued ~~lower~~development of machine-learning loss ~~ratios~~models, aswhich ~~compared~~allow us to ~~new~~respond ~~premiums~~more quickly to changes in the ~~customer’s~~market, ~~first~~we ~~term.~~expect Asimprovement wein ~~grow~~pricing ~~our~~segmentation. ~~business~~We webelieve ~~anticipate,~~this ~~consistent~~allows ~~with~~us ~~industry~~to ~~norms,~~operate ~~that~~with a ~~greater~~cost-to-acquire ~~proportion~~and ofcost-to-serve ~~our~~advantage. ~~premiums~~We ~~will~~believe bethat ~~from~~through ~~customer~~prudent ~~renewals~~investment in and ~~drive~~diversification ~~down~~of ~~the~~our ~~loss~~distribution ~~ratio~~channels, ~~across~~including ~~our~~leveraging ~~portfolio.~~proprietary Wedata ~~also~~science ~~continue~~and totechnology ~~revise~~and ~~contracts~~a tofocus ~~tighten~~on ~~underwriting~~partnerships with automotive, financial services, and ~~implement~~independent ~~rate~~agents, ~~increases~~will toposition ~~control~~us ~~the~~for ~~impact~~sustainable, oflong-term ~~increased~~and ~~loss~~profitable ~~costs~~growth.

~~•Reduced~~As ~~marketing~~a asfull-stack insurance company, we currently employ a ~~percentage~~“capital-efficient” model, which utilizes a variety of ~~premium~~reinsurance structures. ~~Certain~~These ~~recurring~~include ~~customer~~excess ~~premiums~~of ~~have~~loss noand ~~associated~~quota ~~customer~~share ~~acquisition~~reinsurance. ~~costs~~Excess ~~and~~of ~~minimal~~loss ~~underwriting~~provides ~~costs~~us with volatility protection against a portion of large individual losses or an aggregation of losses from catastrophes. Quota share provides, ~~driving~~among ~~profitability~~other advantages, regulatory surplus relief for growing companies. AsWe weprimarily ~~grow~~utilize reinsurance to mitigate impact of large losses or tail events. We continuously evaluate our ~~business,~~utilization weof ~~anticipate,~~third-party ~~consistent~~reinsurance ~~with~~in ~~industry~~order ~~norms,~~to ~~that~~operate a ~~greater~~capital-efficient ~~proportion~~business ofmodel. As our ~~premiums~~gross ~~will~~loss beratios ~~from~~have ~~customer~~stabilized ~~renewals~~we strategically reduced the utilization of external quota share to balance the cost of reinsurance with ~~lower~~capital-efficiency. Over ~~associated~~the ~~acquisition~~long-term, ~~costs~~we expect to maintain the flexibility to modify our reinsurance program.

•Increased revenue per customer. Over time we expect to refine our fee schedules to be more consistent with industry norms. This, paired with targeted marketing, strengthened underwriting and pricing segmentation, will facilitate the opportunity to generate additional fee revenue per customer.66

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.

As a full-stack insurance company, we currently employ a “capital-efficient” model, which utilizes a variety of reinsurance structures. These include excess of loss and quota share reinsurance. Excess of loss provides us with volatility protection against a portion of large individual losses or an aggregation of losses from catastrophes. Quota share provides, among other advantages, regulatory surplus relief for growing companies. These reinsurance structures deliver three core objectives (1) prioritize revenue and targeted profitable customer growth while maintaining regulatory capital requirements, (2) source efficient capital to support customer acquisition costs; and (3) mitigate impact of large losses or tail events. We expect to continuously evaluate our utilization of third-party reinsurance while scaling our business in order to operate a capital-efficient business model. As our gross loss ratios continue to improve and stabilize over the long-term, we expect to maintain the flexibility to modify our reinsurance program.

Given the significant impact of reinsurance on our results of operations, we use certain gross basis key performance indicators to manage and measure our business operations and enhance investor understanding of our business model prior to reinsurance. We believe our long-term success will be apparent through the progression of our gross metrics. Results of operations on a gross basis alone may not be achievable under our regulatory landscape given our historical top-line growth and resulting capital requirements, which are relieved, in part, by obtaining reinsurance.

In addition to our gross basis metrics, management uses adjusted earnings before interest, tax, depreciation, amortization, or adjusted EBITDA, as an integral part of managing our business. We believe adjusted EBITDA provides investors with useful insight into our business because such measure eliminates the effects of certain charges that are not directly attributable to our underlying operating performance. For additional information, including definitions of these key metrics, see “—Key Performance Indicators” and for reconciliations of Direct Contribution and adjusted EBITDA to the most directly comparable generally accepted accounting principles in the United States, or GAAP, metric, see “—Non-GAAP Financial Measures.”

Key Factors and Trends Affecting our Operating Performance

Our financial condition and results of operations have been, and will continue to be, affected by a number of factors, including the following:

Our Ability to Manage and Price Risk

We leverage technology to help manage risk. For instance, we leverage machine learning to “clean” behavioral data obtained through a customer’s mobile device, and we use advanced statistical methods to model that data into usable behavior scores. We leverage intelligent chat functions and various forms of machine learning and advanced automation to help power our claims function. Technology is a key differentiator in managing risk across our key functions. Our success depends on our ability to adequately and competitively price risk.

Our Ability to Attract New Customers

Our long-term growth will depend, in large part, on our continued ability to attract new customers to our platform. We intend to continue to drive new customer growth by leveraging our differentiated consumer experience, our partnership channel, direct performance marketing driven by dynamic data science models, machine learning loss models and our telematics-based pricing models. Additionally, our proprietary dataset will continue to scale as we grow, enabling us to enhance our predictive models to further improve pricing and attract potential new customers. We will also continue to target attractive potential customer segments through diverse distribution strategy, which includes direct and partnership channels. Our ability to attract new customers will depend on a number of factors, including the pricing of our products, offerings of our competitors, success of our partnership channel and the effectiveness of our marketing efforts, and our ability to expand into new markets. Our ability to attract and retain customers depends on maintaining and strengthening our brand by providing superior customer experiences and competitive pricing. In particular, we are challenged by traditional insurers who have more diverse product offerings and longer established operating histories. These competitors can mimic certain aspects of our digital platform and offerings, and as they have more types of insurance products, can offer customers the ability to “bundle” multiple coverage types together, which may be attractive to many customers.

Our Ability to Retain Customers

Our ability to derive significant lifetime value from our customer relationships depends, in part, on our ability to retain our customers over time. Strong retention allows us to build a recurring revenue base, generating additional premiums term over term without material incremental marketing and underwriting costs. As we broadly retain customers and our book of business evolves to be more weighted towards renewals versus new business, as is the case with our mature competitors, we will benefit from the inherently lower loss ratios that characterize renewed premiums. Our ability to retain customers will depend on a number of factors, including our customers’ satisfaction with our products, offerings of our competitors and pricing of products.

Our Ability to be Licensed in ~~all~~All States in the ~~United~~U.S. ~~States~~

Our long-term growth opportunity will benefit from our ability to provide insurance across more states in the ~~United States~~U.S. Today, we are currently licensed in 50 states (48 states for personal auto) and the District of Columbia and operate in 3435 of those states. Our state expansion has unlocked a large total addressable market for sustained growth, made our direct targeted marketing more efficient and created an opportunity to build a national brand, supporting our marketing holistically.

Our Ability to Expand Premiums Through Cross-~~Sell~~Selling and Fee Income Per Policy

We are in the early stages of cross-selling non-auto products across our customer base. InCross-sales ~~2019,~~of ~~we began offering~~ renters ~~insurance~~policies ~~and,~~will ~~in May 2020, we launched our homeowners insurance product in partnership with Homesite Insurance. Cross-sales~~ allow us to generate additional premiums ~~(renters) and fee income (homeowners)~~ without material incremental marketing spend, and ultimately higher revenue per customer. We have also observed that bundling products with auto insurance improves retention as the relationship with our customer expands. Our success in expanding revenues through cross-sales and greater fee income per policy depends on our marketing efforts with new products, continuous state expansion of these offerings and the pricing of our bundled products and continuing to refine the fee schedules in our policyholder ~~contracts to be more consistent with industry norms. The success of our renters insurance offering is also subject to our ability to develop underwriting capabilities to adequately price renters risk.~~

contracts to be more consistent with industry norms. The success of our renters insurance offering is also subject to our ability to develop underwriting capabilities to adequately price renters risk.

Recent Developments Affecting Comparability

General Macroeconomic Factors

Economic instability has led to acute inflationary pressures, supply chain disruptions, changes in interest rates, and changes in equity markets ~~and bank failures~~. There isremains auncertainty ~~risk~~around the future of inflation; ~~remaining~~ elevated levels of inflation for an extended period, ~~which~~ 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. These cost increases have resulted in greater claims severity. 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.

repair and medical costs. These cost increases have resulted in greater claims severity. 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.

Comprehensive Reinsurance

~~During~~We ~~the~~have ~~period~~significantly we reduced the utilization of reinsurance through a strategic reduction of external quota share. The changes to the reinsurance program aim to deliver improved economics ~~and capital efficiency~~. Our diversified approach to reinsurance allows us to optimize capital requirements while remaining flexible in response to changes in market conditions or changes specific to our own business. We may choose to amend, commute, and/or non-renew certain third-party reinsurance arrangements in the future, which may result in us retaining more or less of our business. To the extent we retain a larger share of our book of business, our capital requirements may increase.

Key Performance Indicators

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 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.

	For the Years Ended December 31,
	2023			2022			2021
	2024			2023			2022
	(dollars in millions, except Premiums per policy)
Policies in force	~~341~~414,~~764~~862			~~220~~341,~~354~~764			~~354~~220,~~371~~354
Premiums per policy	$	1,~~423~~584		$	1,~~220~~423		$	1,~~006~~220
Premiums in force	$	~~972~~1,314.73		$	~~537~~972.7		$	~~713~~537.07
Gross premiums written	$	~~783~~1,301.1		$	~~600~~783.01		$	~~742~~600.60
Gross premiums earned	$	~~635~~1,231.80		$	~~643~~635.68		$	~~719~~643.6
Gross profit/(loss)	$	76.1		$	(32.2)		$	(51.9)
Gross profit (loss)	$	337.1		$	76.1		$	(32.2)
Net loss	$	(147.4)		$	(297.7)		$	(521.1)
Net income (loss)	$	30.9		$	(147.4)		$	(297.7)
Direct contribution	$	~~150~~394.70		$	27150.67		$	827.16
Adjusted EBITDA	$	~~(42~~111.9)		$	(~~185~~42.9)		$	(~~446~~185.19)
Net loss and LAE ratio	8268.85		%	~~122~~82.8		%	~~126~~122.48		%
Net expense ratio	5027.49		%	7250.24		%	~~134~~72.52		%
Net combined ratio	~~133~~96.24		%	~~195~~133.02		%	~~260~~195.90		%
Gross loss ratio	6558.29		%	8265.12		%	8682.01		%
Gross LAE ratio	98.6		%	109.36		%	10.53		%
Gross expense ratio	4127.62		%	4541.46		%	7145.34		%
Gross combined ratio	~~116~~94.47		%	~~137~~116.84		%	~~167~~137.8		%
Gross accident period loss ratio	6659.09		%	8064.20		%	8880.73		%

Policies in Force

We define policies in force as the number of current and active auto insurance policyholders underwritten by us as of the period end date. We view policies in force as an important metric to assess our financial performance because policy growth and retention drives our revenue growth, expands brand awareness, deepens our market penetration, and generates additional data to continue to improve the functioning of our platform.

Premiums per Policy

We define premiums per policy as the ratio of gross premiums written on auto insurance policies in force at the end of the period divided by policies in force. We view premiums per policy as an important metric since the higher the premiums per policy the greater the amount of earned premium we expect from each policy.

Premiums in Force

We define premiums in force as premiums per policy multiplied by policies in force multiplied by two. We view premiums in force as an estimate of annualized run rate of gross premiums written as of a given period. Since our auto policies are six-month policies, we multiply this figure by two in order to determine an annualized amount of premiums in force. We view this as an important metric because it is an indicator of the size of our portfolio of policies as well as an indicator of expected earned premium over the coming 12 months. Premiums in force is not a forecast of future revenue nor is it a reliable indicator of revenue expected to be earned in any given period. We believe that our calculation of premiums in force is useful to investors and analysts because it captures the impact of ~~fluctuations in customers and premiums per policy at the end of each reported period, without adjusting for known or projected policy updates, cancellations and non-renewals.~~

fluctuations in customers and premiums per policy at the end of each reported period, without adjusting for known or projected policy updates, cancellations and non-renewals.

Gross Premiums Written

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.

Gross Premiums Earned

We define gross premiums earned as the amount of gross premium that was earned during the period. Premiums are earned over the period in which insurance protection is provided, which is typically six months. Gross premiums earned includes direct premiums and assumed premiums. We view gross premiums earned as an important metric as it allows us to evaluate our premium levels prior to the impacts of reinsurance. It is the primary driver of our consolidated GAAP revenues. As with gross premiums written, we use gross premiums earned, 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.

Gross Profit/ (Loss)

We define gross profit/ (loss) as total revenue minus net loss and LAE and other insurance expense (benefit). We view gross profit/ (loss) as an important metric because we believe it is informative of the financial performance of our core insurance business.

Direct Contribution

We define direct contribution, a non-GAAP financial measure, as gross profit/ (loss) excluding net investment income, net realized gains on investments, acquisition costs which include report costs, and refunds related to these expenses and commission expenses related to our partnership channel, fixed costs which include certain warrant compensation expense related to ~~our~~policies ~~embedded~~originating ~~channel~~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. 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 (benefit). 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.

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 (benefit). 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.

See the section titled “—Non-GAAP Financial Measures” for a reconciliation of total revenue to direct contribution.

Adjusted EBITDA

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

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

Net Loss and LAE Ratio

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.

Net Expense Ratio

We define net expense ratio expressed as a percentage, as the ratio of all operating expenses less loss and LAE and less fee income to net premiums earned. We view net expense ratio as important because it allows us to analyze our expense and acquisition trends, net of fee income, and allows investors to evaluate these expenses exclusive of our loss and LAE.

Net Combined Ratio

We define net combined ratio expressed as a percentage, as the sum of net loss and LAE ratio and net expense ratio. We view net combined ratio as important because it allows us to analyze our underwriting result trends and is a key indicator of overall profitability and health of the overall business. We believe it is useful to investors to evaluate these components separately and in the aggregate when reviewing our underwriting performance. A net combined ratio under 100% indicates an underwriting profit, while a net combined ratio greater than 100% indicates an underwriting loss.

Gross Loss Ratio

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

Gross LAE Ratio

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.

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.

Gross Expense Ratio

We define gross expense ratio expressed as a percentage as the ratio of gross operating expenses less loss and LAE and less fee income to gross premiums earned. We view gross expense ratio as important because it allows us to analyze the underlying expense base of the business and establish expense targets, prior to the impact of reinsurance. We believe gross expense ratio is useful for investors to further evaluate business health and performance, prior to the impact of reinsurance.

Gross Combined Ratio

We define gross combined ratio expressed as a percentage as the sum of the gross loss ratio, gross LAE ratio and gross expense ratio. We view gross combined ratio as important because it allows us to evaluate financial performance and establish targets that we believe more closely reflect the underlying performance and profitability of the business prior to reinsurance. Further, we believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our gross underwriting performance. A gross combined ratio under 100% indicates an underwriting profit while a gross combined ratio greater than 100% indicates an underwriting loss, prior to the impact of reinsurance.

Gross Accident Period Loss Ratio

Gross accident period loss ratio, expressed as a percentage, represents all losses and claims expected to arise from insured events that occurred during the applicable period regardless of when they are reported and finally settled divided by gross premiums earned for the same period. Changes to our loss reserves are the primary driver of the difference between our gross accident period loss ratio and gross loss ratio. We believe that gross accident period loss ratio is useful in evaluating expected losses prior to the impact of reinsurance.

Components of Our Results of Operations

Revenue

We generate revenue from net premiums earned, net investment income, net realized gains on investments, fee income and other income.

Net Premiums Earned

Premiums written are deferred and earned pro rata over the policy period. Net premiums earned represents the earned portion of our gross premiums written, less the earned portion that is ceded to third-party reinsurers under our reinsurance agreements.

Net Investment Income

Net investment income represents interest earned from our cash and cash equivalents, ~~and~~ fixed ~~maturity~~maturities, 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~~low ~~Income~~income ~~Housing~~housing ~~Tax~~tax ~~Credits,~~credits ~~or LIHTC,~~ investments in limited liability entities to offset ~~Georgia~~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.

Net Realized Gains on Investments

Net realized gains on investments represents the difference between the amount received by us on the sale of an investment as compared to the investment’s amortized cost basis.

Fee Income

Fee income consists primarily of the flat fee we charge for installment payments which relates to the additional administrative costs associated with processing more frequent billings. These fees are recognized in the period in which we process the installment. We also charge policy fees, which are typically nonrefundable fees that are intended to reimburse a portion of the costs incurred to underwrite the policy. These fees are recognized ratably over the policy coverage period. Fee income also includes late payment fees that are collected from our policyholders. These fees are recognized in the period in which we process the late payment.

Other Income

Other income is primarily comprised of revenue earned from distributing website and ~~app~~mobile application policy inquiry leads in geographies where we do not have a presence, recognized when we generate the lead~~; and commissions earned for homeowners policies placed with third-party insurance companies where we have no exposure to the insured risk, recognized on the effective date of the associated policy~~.

Operating Expenses

Our operating expenses consist of loss and LAE, sales and marketing, other insurance expense (benefit), technology and development, and general and administrative expenses.

Loss and Loss Adjustment Expenses

Loss and LAE include the costs incurred for claims, payments made and estimated future payments to be made to or on behalf of our policyholders, including expenses needed to adjust or settle claims, net of amounts ceded to reinsurers. Loss and LAE include an amount determined using adjuster determined case-base estimates for reported claims and actuarial determined unpaid claim estimates using past experience and historical emergence patterns for unreported losses and LAE. These reserves are a liability established to cover the estimated ultimate cost to settle insured losses. The unpaid loss estimates consider loss trends, mix of business, and other risk factors impacting claims settlement. The method used to estimate unpaid LAE liability is based on claims transaction data, including the relative cost of adjusting and settling a range of claim types from express material damage claims to more complex injury cases.

Loss and LAE are net of amounts ceded to reinsurers. We enter into reinsurance contracts to limit our exposure to potential losses as well as to provide additional capacity to write more business. These expenses are a function of the size and term of the insurance policies we write and the loss experience associated with the underlying risks. This includes an allowance for credit losses based on the probability of default and expected loss given default of a reinsurer. Loss and LAE may be paid out over a period of years.

Various other expenses incurred during claims processing are considered LAE. These amounts include Personnel Costs for claims-related employees; vendor expenses; software expense; internally developed software amortization; and Overhead.

Sales and Marketing

Sales and marketing includes both acquisition and fixed expenses. ~~related~~We toview direct performance marketing, experimental marketing, channel media, advertising, ~~sponsorship,~~and referral fees ~~and~~as ~~partnership~~acquisition ~~channel~~expenses. ~~These~~We ~~expenses~~view ~~also~~sponsorship, ~~include~~certain non-commission expenses related to the partnership channel, Personnel Costs and Overhead related to our brand strategy, creative and business development activities, and certain ~~warrant~~data ~~compensation~~science ~~expense~~activities ~~related~~as tofixed ~~our embedded channel~~costs. We incur sales and marketing expenses for all product offerings. Sales and marketing are expensed as incurred. Certain warrant compensation expense is recognized on a pro-rata basis considering progress toward completing Carvana’s online buying platform, or the Integrated Platform, under the Carvana commercial agreement.

We plan to continue investing in and diversifying our marketing channels to attract and acquire new customers, increase our brand awareness, and expand our product offerings within certain markets. We expect that our sales and marketing will vary based upon the competitive environment and other investments in acquisition. Over the long-term, ~~our~~we ~~sales~~expect ~~and~~it ~~marketing~~ will decrease as a percentage of revenue as the proportion of renewals to our total business increases.

Other Insurance Expense (Benefit)

Other insurance expense (benefit) includes ~~underwriting~~ expenses, ~~commission~~primarily ~~expenses~~ related to ~~our~~insurance ~~partnership channel, premium taxes, credit card~~ and ~~policy~~underwriting ~~processing~~operations ~~expenses,~~of ~~premium~~the ~~write-offs~~business, ~~insurance~~it ~~license~~is ~~expenses,~~comprised ~~certain~~of ~~warrant compensation expense related to our embedded channel~~acquisition, ~~and~~variable ~~Personnel Costs~~ and ~~Overhead~~fixed ~~related to actuarial and certain data science activities~~expenses. We ~~amortize~~view areport ~~portion~~costs ofand ~~our~~refunds ~~deferred~~related ~~policy~~to ~~acquisition~~these ~~costs~~expenses ~~including~~and ~~certain~~commission ~~commissions~~expenses related to our partnership channel, ~~premium~~as ~~taxes,~~acquisition ~~and report~~ costs. ~~related~~We toview ~~the~~premium ~~successful~~taxes, ~~acquisition~~credit ofcard aand policy. ~~Other~~processing ~~insurance~~expenses ~~expense~~and ~~(benefit)~~premium iswrite-offs ~~expensed~~ as ~~incurred,~~variable ~~except for~~ costs. ~~related~~We toview ~~deferred~~insurance ~~policy~~license ~~acquisition~~expenses, ~~costs~~certain ~~that~~warrant ~~are~~compensation ~~capitalized~~expense ~~and~~related ~~subsequently~~to ~~amortized~~policies ~~over~~originating through the ~~same~~integrated ~~period~~automobile ininsurance ~~which~~solution ~~the~~for ~~related~~Carvana’s ~~premiums~~online ~~are~~buying ~~earned.~~platform, ~~Certain~~low ~~warrant~~income ~~compensation~~housing ~~expense~~tax iscredits ~~recognized~~which onoffset acertain ~~pro-rata~~state ~~basis~~premium ~~considering~~taxes, ~~progress~~Personnel ~~toward~~Costs ~~achieving~~and ~~milestones~~Overhead ~~for~~related ~~policies~~to ~~originated~~actuarial ~~through~~and ~~the~~certain ~~Integrated~~data ~~Platform~~science activities as ~~defined~~fixed ~~under the Carvana commercial agreement~~costs.

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 (benefit) 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.

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 (benefit).

Technology and Development

Technology and development ~~expense~~are ~~consists~~fixed expenses that consist of software development costs related to our mobile app and homegrown information technology systems; third-party services related to infrastructure support; Personnel Costs and Overhead for engineering, product, technology, and certain data science activities; and amortization of internally developed software. Technology and development is expensed as incurred, except for development and testing costs related to internally developed software that are capitalized and subsequently amortized over the expected useful life. Over time, we expect technology and development to decrease as a percentage of revenue.

General and Administrative

General and administrative are fixed expenses that primarily relate to external professional service expenses; Personnel Costs and Overhead for corporate functions; and depreciation expense for computers, furniture and other fixed assets; ~~write-offs;~~ and restructuring costs which include employee costs, real estate exit costs and other costs. General and administrative expenses are expensed as incurred. We expect general and administrative expenses to decrease as a percentage of total revenue over time.

Non-Operating Expenses

Interest Expense

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 discount and debt issuance costs. In addition, changes in the fair value of warrant liabilities that ~~were~~are associated with our long-term debt are recorded as interest expense.

Loss on ~~Early~~ Extinguishment of Debt

Loss on ~~early~~ extinguishment of debt is not an operating expense; therefore, we include these expenses below operating expenses. Loss on ~~early~~ extinguishment of debt primarily relates to the difference between the reacquisition price of the debt and the net carrying amount of the extinguished debt. Upon extinguishment of debt, the remaining unamortized discount and debt ~~and warrants~~ issuance costs are recognized as expense.

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Results of Operations

Comparison of the Years Ended December 31, ~~2023~~2024 and ~~2022~~2023

The following table presents our results of operations for the periods indicated:

	For the Years Ended December 31,
	2023		2022		$ Change		% Change
	2024		2023		$ Change		% Change
	(dollars in millions)
Revenue:
Net premiums earned	$	~~399~~1,070.9	$	~~285~~399.9	$	~~114~~671.0	39167.98	%
Net investment income	3035.29		630.2		245.07		~~387~~18.19	%
Net realized gains on investments	—		0.5		(0.5)		(100.0)	%
Fee income	66.0		23.4		42.6		182.1	%
Fee income	23.4		16.5		6.9		41.8	%
Other income	3.7		1.5		2.2		146.7	%
Other income	1.5		1.7		(0.2)		(11.8)	%
Total revenues	1,176.5		455.0		721.5		158.6	%
Total revenues	455.0		310.8		144.2		46.4	%
Operating expenses:
Loss and loss adjustment expenses	~~331~~733.30		~~351~~331.03		~~(19~~401.7)		(5121.6)2	%
Sales and marketing	49135.38		4849.03		186.35		2175.75	%
Other insurance expense (benefit)	47.6		(8.0)		55.6		695.0	%
Other insurance expense	106.4		47.6		58.8		123.5	%
Technology and development	4453.83		5544.58		~~(10~~8.7)5		(19.3)0	%
General and administrative	8369.35		~~127~~83.43		(4413.18)		(3416.6)	%
Total operating expenses	~~556~~1,098.30		~~573~~556.93		~~(17~~541.6)7		(397.1)4	%
Operating loss	(101.3)		(263.1)		161.8		(61.5)	%
Operating income (loss)	78.5		(101.3)		179.8		177.5	%
Interest expense	(4642.12)		(3446.61)		~~(11~~3.5)9		33(8.25)	%
Loss before income tax expense	(147.4)		(297.7)		150.3		(50.5)	%
Loss on extinguishment of debt	(5.4)		—		(5.4)		100.0	%
Income (loss) before income tax expense	30.9		(147.4)		178.3		121.0	%
Income tax expense	—		—		—		—	%
Net loss	(147.4)		(297.7)		150.3		(50.5)	%
Net income (loss)	30.9		(147.4)		178.3		121.0	%
Other comprehensive income (loss):
Other comprehensive income:
Changes in net unrealized gains (losses) on investments	3.3		(6.2)		9.5		153.2	%
Changes in net unrealized gains on investments	0.2		3.3		(3.1)		(93.9)	%
Comprehensive loss	$	(144.1)	$	(303.9)	$	159.8	(52.6)	%
Comprehensive income (loss)	$	31.1	$	(144.1)	$	175.2	121.6	%

Revenue

Net Premiums Earned

Net premiums earned increased ~~$114.0~~due ~~million,~~to oran ~~39.9%,~~increase toin ~~$399.9~~policies ~~million~~in ~~for~~force ~~the~~as ~~year~~a ~~ended~~result ~~December 31,~~of ~~2023~~increased ~~compared~~direct toperformance ~~2022.~~marketing ~~The~~spend, ~~increase~~continued ~~was~~growth ~~primarily~~in ~~due~~our topartnership channel, reduced external quota share cessions of gross premiums earned to reinsurers between periods and greater premium per policy resulting from rate actions. ~~This was partially offset by lower gross premiums earned between the periods.~~

During the years ended December 31, ~~2023~~2024 and ~~2022~~2023, we ceded approximately 3713.10% and 5537.61% of our gross premiums earned, ~~and 26.8% and 55.2% of our gross premiums written to third-party reinsurers,~~ respectively. The change in cessions between periods was primarily driven by a strategic reduction of quota share reinsurance and commutations of certain reinsurance agreements in 2023.

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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 years ended December 31, 2024 and 2023:

	For the Years Ended December 31,
	2023		2022		$ Change		% Change
	2024		2023		$ Change		% Change
	(dollars in millions)
Gross premiums written	$	~~783~~1,301.1	$	~~600~~783.01	$	~~183~~518.10	3066.51	%
Ceded premiums written	(~~209~~137.90)		(~~331~~209.29)		~~121~~72.39		(3634.67)	%
Net premiums written	~~573~~1,164.21		~~268~~573.82		~~304~~590.49		~~113~~103.21	%
Gross premiums earned	~~635~~1,231.80		~~643~~635.68		(7595.8)2		(193.2)6	%
Ceded premiums earned	(~~235~~160.91)		(~~357~~235.79)		~~121~~75.8		(3432.1)	%
Net premiums earned	$	~~399~~1,070.9	$	~~285~~399.9	$	~~114~~671.0	39167.98	%

Gross premiums written increased due to growth in new writings, ~~particularly~~as ina ~~the~~result ~~second~~of ~~half~~increased ofdirect ~~2023,~~performance ~~compared~~marketing tospend ~~contraction~~and ofcontinued ~~policies~~growth in ~~force~~our ~~during~~partnership ~~2022,~~channel ascompared ato ~~result~~2023. ofThe ~~decreased~~increase ~~direct~~in ~~performance~~gross ~~marketing spend. Gross~~ premiums earned ~~decreased~~was primarily due to ~~lower~~greater ~~average~~ policies in force ~~for~~and ~~the~~an ~~year ended December 31, 2023 compared to 2022~~11. ~~This was partially offset by a 16.6~~3% increase in premium per policy ~~for automobile insurance~~ primarily attributable to rate actions.

Net Investment Income

Net investment income increased ~~$24.0~~due ~~million, or 387.1%~~ to a $307.23 million ~~for~~increase ~~the~~in ~~year~~interest ~~ended~~and ~~December 31,~~dividends ~~2023~~received ~~compared~~primarily due to ~~2022.~~a ~~The~~higher ~~increase~~average ~~was~~cash ~~primarily~~balance ~~driven~~and bya ~~higher~~larger ~~interest~~investment ~~and~~portfolio. ~~dividends~~This ~~received~~was ~~attributable~~partially tooffset ~~investing~~by ~~more~~a in$2.2 ~~higher~~million increase ~~yielding~~in ~~investments,~~impairment asrelated ato ~~result~~low ofincome ~~the~~housing ~~favorable~~tax ~~interest~~credit ~~rate environment~~utilization.

Fee Income

Fee income increased ~~$6.9~~due ~~million, or 41.8%,~~ to ~~$23.4 million for the year ended December 31, 2023 compared to 2022. The increase was primarily driven by~~ a $424.14 million increase in policy fees and ~~an $1.3 million increase in late payment fees due to implementation of new fees in 2023 and as~~ a ~~result of refining our fee schedules to policyholders. In addition, we experienced an~~ $115.04 million increase in installment fees ~~attributable~~due to anincreased ~~increase~~policies in ~~collected fees, as a result of increased gross written premium~~force.

Operating Expenses

Loss and Loss Adjustment Expenses

Loss and LAE ~~decreased~~increased ~~$19.7~~due ~~million, or 5.6%,~~ to ~~$331.3~~additional ~~million~~losses ~~for~~incurred ~~the~~on ~~year~~increased ~~ended~~gross ~~December 31,~~premiums ~~2023~~earned ~~compared~~volume toand ~~2022.~~reduced ~~The~~cessions ~~decrease~~of ~~was~~losses ~~primarily due~~ to ~~better~~reinsurers ~~loss~~driven ~~experience for the year ended December 31, 2023 compared to 2022. This was partially offset~~ by ~~reduced~~a ~~cessions~~strategic reduction of ~~losses~~quota toshare ~~reinsurers~~reinsurance and commutations of certain reinsurance agreements~~, which includes an $1~~.~~7 million expense related to an allowance for credit losses for the year ended December 31, 2023 compared to 2022.~~

Gross accident period loss ratios decreased to 6659.09% for the year ended December 31, ~~2023~~2024, from 8064.20% for ~~2022~~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 experienced a 75% increase in severity per claim and a 54% decrease in claim frequency for the year ended December 31, ~~2023~~2024 compared to ~~2022. The~~2023 ~~claim~~across ~~severity~~our ~~and frequency estimates are based on~~ bodily injury, collision, and property damage coverages,. ~~the~~The claim frequency estimates are tenure mix adjusted.

Sales and Marketing

Sales and marketing increased ~~$1.3~~due ~~million, or 2.7%,~~ to ~~$49.3~~greater ~~million~~acquisition ~~for~~expense ~~the~~as ~~year~~we ~~ended~~invested ~~December 31, 2023 compared to 2022. The increase was due to a $37.4 million increase~~ in ~~direct~~growing ~~performance~~our ~~marketing~~business ~~spend~~ to drive accretive growth, ~~particularly in the second half of 2023 when we experienced a favorable competitive environment for deploying customer acquisition costs,~~ and deeper market penetration in the states in which we operate. This ~~was~~resulted ~~partially~~in ~~offset by~~ a $2176.47 million ~~decrease~~increase in ~~content~~direct ~~development,~~performance marketing ~~partnership, sponsorship and advertising costs due to a shift in our direct marketing strategy~~spend. ~~In addition, we experienced an $8.8 million decline in warrant compensation expense related to the completion of the Integrated Platform pursuant to the Carvana commercial agreement in 2022.~~ We also experienced a $6.37 million ~~decrease~~increase in ~~Personnel~~experimental ~~Costs~~marketing spend as apart ~~result~~ of aour ~~decrease~~efforts ~~in headcount, primarily attributable~~ to ~~the~~diversify ~~involuntary~~our ~~workforce~~distribution ~~reductions in 2022~~channels.

~~Other Insurance Expense (Benefit)~~76

Other ~~insurance~~Insurance expense (benefit) increased $55.6 million, or 695.0%, to an expense of $47.6 million for the year ended December 31, 2023 compared to 2022. The increase was primarily driven by a $22.1 million decrease in net ceding commission contra-expense as a result of a decline in ceded premiums and commutations of certain reinsurance agreements. We also experienced a $20.4 million increase in report costs due to an increase in customer applications and new writings, and an $11.6 million increase in Carvana warrant compensation expense as a result of policies originating from the Integrated Platform. In addition, we experienced a $9.9 million increase in amortization of deferred policy acquisition costs for commission expenses related to our partnership channel. This was partially offset by a $4.9 million decrease in premium write-offs and a $4.0 million decrease in Personnel Costs as a result of a decrease in headcount due to the involuntary workforce reductions in 2022. Expense

Other insurance expense increased from growth of our earned premium and policies in force, this resulted in greater variable expense including premium write-offs of $21.6 million, premium taxes of $11.9 million and policy processing fees of $6.1 million. We also saw a $28.9 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 initiated in 2023 and continued in 2024. Our acquisition expenses increased due to greater commissions paid related to the continued growth in our partnership channel, including amortization of deferred policy acquisition costs, of $15.8 million. While acquisition expenses increased overall, report costs decreased $3.5 million primarily driven by enhanced efficiency and reduced costs for reports related to new business. Additionally, we recorded a $10.9 million sales tax refund related to multiple prior years. Fixed expenses decreased due to a reduction of $13.4 million in Carvana warrant expense, as all short-term warrant expense has been recognized upon vesting. Additionally, we recorded an additional $2.5 million of low income housing tax credit utilization that reduces premium taxes.

Technology and Development

Technology and development ~~decreased~~increased ~~$10.7~~due ~~million, or 19.3%,~~ to a $445.80 million ~~for~~increase ~~the~~in ~~year~~Personnel ~~ended December 31, 2023 compared to 2022~~Costs. ~~The~~We ~~decrease~~also ~~was~~experienced ~~primarily~~a ~~driven by an~~ $82.41 million ~~decrease~~increase in ~~Personnel~~amortization ~~Costs as a result of a decrease in headcount,~~ primarily ~~attributable~~driven toby ~~the~~accelerated ~~involuntary~~amortization ~~workforce~~of ~~reductions~~internally indeveloped ~~2022.~~software Weand ~~also experienced~~ a $31.45 million ~~decrease~~increase in software development expense as awe ~~result~~continue ~~of initiatives~~ to ~~reduce~~invest ~~operating~~in ~~costs.~~developing ~~This~~and ~~was~~improving ~~partially~~our ~~offset~~technology byplatforms anand $1infrastructure.~~3 million increase in amortization of internally developed software.~~

General and Administrative

General and administrative decreased ~~$44.1~~due ~~million, or 34.6%,~~ to a $835.39 million ~~for~~decrease ~~the~~in ~~year~~corporate ~~ended~~insurance ~~December 31,~~due ~~2023 compared~~ to ~~2022.~~maturation ~~The~~as ~~decrease~~a ~~was~~public ~~driven~~company byand a $255.07 million decrease in ~~Personnel~~legal ~~Costs~~ and aprofessional fees, of which $72.47 million ~~decrease~~relates into ~~restructuring~~the ~~costs~~2022 asmisappropriation aof ~~result~~funds ofby a ~~decrease~~former insenior ~~headcount,~~marketing ~~primarily attributable to the involuntary workforce reductions in 2022~~employee.

In addition, we experienced a $10.2 million decrease related to the write-off of pre-paid marketing expense recognized in 2022, partially offset by a decrease of $1.9 million in insurance recovery contra-expense related to the misappropriation of funds by a former senior marketing employee recorded in 2022.

Non-Operating Expenses

~~Interest~~Loss ~~Expense~~on Extinguishment of Debt

~~Interest~~Loss ~~expense~~on ~~increased~~extinguishment ~~$11.5~~of ~~million,~~debt ~~or 33.2%, to $46.1 million for the year ended December 31, 2023 compared to 2022. The increase~~ was ~~primarily~~ due to aunamortized ~~$11.2~~discount ~~million~~and ~~increase in~~ debt ~~interest~~issuance ~~expense~~costs ~~primarily~~being expensed as a result of aextinguishing ~~greater average interest rate for~~ the ~~year~~Term ~~ended December 31, 2023 compared to 2022~~Loan.

7477

~~Other~~Comparison ~~Comprehensive~~of ~~Income~~the ~~(Loss)~~Years Ended December 31, 2023 and 2022

Changes in Net Unrealized Gains (Losses) on Investments

Changes in net unrealized gains (losses) on investments increased $9.5 million, or 153.2%, to a gain of $3.3 million for the year ended December 31, 2023 compared to 2022. The increase is primarily attributable to investments being reinvested at maturity in securities that reflect the current interest rate environment.

Comparison of the Years Ended December 31, 2022 and 2021

The following table presents our results of operations for the periods indicated:

	For the Years Ended December 31,
	2022		2021		$ Change		% Change
	2023		2022		$ Change		% Change
	(dollars in millions)
Revenue:
Net premiums earned	$	~~285~~399.9	$	~~310~~285.39	$	~~(24~~114.4)0	(739.9)	%
Net investment income	630.2		56.02		124.20		24387.01	%
Net realized gains on investments	~~0.5~~—		20.45		(10.95)		(79100.20)	%
Fee income	1623.54		2016.95		(46.4)9		~~(21~~41.1)8	%
Other income	1.75		61.87		(50.12)		(7511.08)	%
Total revenue	~~310~~455.80		~~345~~310.48		~~(34~~144.6)2		~~(10~~46.0)4	%
Operating expenses:
Loss and loss adjustment expenses	~~351~~331.03		~~392~~351.30		(4119.37)		(~~10.~~5.6)	%
Sales and marketing	4849.03		~~270~~48.20		~~(222~~1.2)3		~~(82.~~2).7	%
Other insurance (benefit) expense	(8.0)		5.0		(13.0)		(260.0)	%
Other insurance expense (benefit)	47.6		(8.0)		55.6		695.0	%
Technology and development	5544.58		6555.5		(10.07)		(1519.3)	%
General and administrative	~~127~~83.43		97127.64		29(44.81)		30(34.56)	%
Total operating expenses	~~573~~556.93		~~830~~573.69		(~~256~~17.76)		(303.91)	%
Operating loss	(~~263~~101.13)		(~~485~~263.21)		~~222~~161.18		(4561.85)	%
Interest expense	(3446.61)		(2034.06)		(1411.65)		7333.02	%
Loss on early extinguishment of debt	—		(15.9)		15.9		(100.0)	%
Loss before income tax expense	(147.4)		(297.7)		150.3		(50.5)	%
Loss before income tax expense	(297.7)		(521.1)		223.4		(42.9)	%
Income tax expense	—		—		—		—	%
Net loss	(~~297~~147.74)		(~~521~~297.17)		~~223~~150.43		(4250.95)	%
Other comprehensive loss:
Other comprehensive income (loss):
Changes in net unrealized losses on investments	(6.2)		(5.2)		(1.0)		19.2	%
Changes in net unrealized gains (losses) on investments	3.3		(6.2)		9.5		153.2	%
Comprehensive loss	$	(~~303~~144.91)	$	(~~526~~303.39)	$	~~222~~159.48	(4252.36)	%

The December 31, ~~2022~~2023 and ~~2021~~2022 results of operations discussion can be found in Part II, Item 7, “Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023.

Non-GAAP Financial Measures

The non-GAAP financial measures below have not been calculated in accordance with GAAP and should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results. In addition, direct contribution and adjusted EBITDA should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions. Therefore, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies.

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)~~including ~~analyze~~when ~~and~~determining ~~evaluate~~incentive 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.

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.

Direct Contribution

For the definition of direct contribution and why management believes this measure provides useful information to investors, see “—Key Performance Indicators.”

The following table provides a reconciliation of total revenue to direct contribution for the years ended December 31, ~~2023~~2024, ~~2022~~2023 and ~~2021~~2022:

	For the Years Ended December 31,
	2023		2022		2021
	2024		2023		2022
	(dollars in millions)
Total revenue	$	~~455~~1,176.05	$	~~310~~455.80	$	~~345~~310.48
Loss and loss adjustment expenses	(~~331~~733.30)		(~~351~~331.03)		(~~392~~351.30)
Other insurance (expense) benefit	(47106.64)		8(47.06)		(58.0)
Gross profit/(loss)	76.1		(32.2)		(51.9)
Gross profit (loss)	337.1		76.1		(32.2)
Net investment income	(3035.29)		(630.2)		(56.02)
Net realized gains on investments	—		~~(0.5)~~—		(20.45)
Adjustments from other insurance (expense) benefit(1)	7666.35		3876.43		5638.04
Ceded premiums earned	~~235~~160.91		~~357~~235.79		~~409~~357.37
Ceded loss and loss adjustment expenses	(~~144~~97.57)		(~~243~~144.75)		(~~302~~243.57)
Net ceding commission and other(2)	(6236.91)		(8562.9)		(9585.49)
Direct contribution	$	~~150~~394.70	$	27150.67	$	827.16

______________

(1) Adjustments from other insurance (expense) benefit ~~includes~~consists of acquisition costs including report costs, and refunds related to these expenses and commission expenses related to our partnership channel of $49.7 million, $50.8 million and $18.7 million for the years ended December 31, 2024, 2023 and 2022, respectively. Fixed expenses including certain warrant compensation expense related to ~~our~~policies ~~embedded~~originating ~~channel~~through the integrated automobile insurance solution for Carvana’s online buying platform, Personnel ~~costs~~Costs, Overhead, licenses, professional fees and other of $16.8 million, $25.5 million and $19.7 million for the years ended December 31, 2024, 2023 and 2022, respectively.

(2) Net ceding commission and other is comprised of ceding commissions received in connection with reinsurance ceded, partially offset by amortization of excess ceding commission and other impacts of reinsurance ceded.

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Adjusted EBITDA

For the definition of adjusted EBITDA and why management believes this measure provides useful information to investors, see “—Key Performance Indicators.”

The following table provides a reconciliation of net income (loss) to adjusted EBITDA for the years ended December 31, ~~2023~~2024, ~~2022~~2023 and ~~2021~~2022:

	For the Years Ended December 31,
	2023		2022		2021
	2024		2023		2022
	(dollars in millions)
Net loss	$	(147.4)	$	(297.7)	$	(521.1)
Net income (loss)	$	30.9	$	(147.4)	$	(297.7)
Adjustments:
Interest expense	4339.27		3143.92		1431.49
Income tax expense	—		—		—
Depreciation and amortization	1214.25		12.12		1612.61
Share-based compensation	1618.95		2516.29		1925.32
Loss on early extinguishment of debt	—		—		15.9
Loss on extinguishment of debt	5.4		—		—
Warrant compensation expense	173.48		1417.54		814.85
Restructuring costs(1)	110.2		1811.62		—18.6
Write-offs and other (2)	3(1.61)		93.56		—9.5
Adjusted EBITDA	$	~~(42~~111.9)	$	(~~185~~42.9)	$	(~~446~~185.19)

______________

(1) Restructuring costs consist of employee costs, real estate exit costs, and other. This includes zero, $0.4 million, and $5.3 million ~~and zero~~ of share-based compensation for the years ended December 31, ~~2023~~2024, ~~2022~~2023 and ~~2021~~2022, respectively. This also includes $0.4 million, $0.4 million and $1.7 million ~~and zero~~ of depreciation and amortization for the years ended December 31, ~~2023~~2024, ~~2022~~2023 and ~~2021~~2022, respectively. For further information on restructuring costs, see Note 10, “Restructuring Costs,” in the Notes to Consolidated Financial Statements.

(2) Write-offs and other primarily reflects legal costs, write-off prepaid marketing expense and other items that do not reflect our ongoing operating performance. This includes write-off of prepaid marketing expenses of ~~zero,~~ $10.2 million ~~and zero~~ for the ~~years~~year ended December 31, ~~2023,~~ 2022 ~~and 2021, respectively~~. Legal and other fees net of recoveries related to the 2022 misappropriation of funds by a former senior marketing employee ~~in 2022~~ of $3(1.2 1) million, $13.2 million and ~~zero~~$(0.7) million for the years ended December 31, ~~2023~~2024, ~~2022~~2023 and ~~2021~~2022, respectively~~, partially offset by an insurance recovery of $1~~.~~9 million in 2022.~~

Liquidity and Capital Resources

General

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.

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, ~~bank failures~~ and our utilization of reinsurance. There isremains auncertainty ~~risk~~around the future of inflation; ~~remaining~~ elevated levels of inflation for an extended period, ~~which~~ could cause claims and claim expenses to increase, impact the performance of our investment portfolio or have other adverse effects. 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 ofor ~~our~~less ~~business in the future. To the extent we retain a larger share~~ of our ~~book of business, our capital requirements may increase.~~

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business in the future. To the extent we retain a larger share of our book of business, our capital requirements may increase.

Regulatory Considerations

We are organized as a holding company, but our primary operations are conducted by ~~two 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 Florida. To date, our domestic insurance subsidiaries have not paid any dividends, and as of December 31, ~~2023~~2024, they were not permitted to pay any dividends without approval of the applicable superintendent, commissioner and/or director.

If our insurance subsidiaries’ business grows, the amount of capital we are required to maintain to satisfy our risk-based capital requirements may increase significantly. To comply with these regulations, we may be required to maintain capital in the insurance subsidiaries that we would otherwise invest in our growth and operations. As of December 31, ~~2023~~2024, our insurance subsidiaries maintained a risk-based capital level that is in excess of an amount that would require any corrective actions on our part.

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 December 31, ~~2023~~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 December 31, ~~2023~~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~~notify ~~approval from~~ CIMA before it can pay any dividend to the holding company.

Financing Arrangements

On January 26, 2022, we closed on a $300.0 million five-year term loan, or Term Loan. ~~The~~In ~~maturity~~October 2024, we entered into the second amendment to the Term Loan, or Amended Term Loan, that resulted in extinguishment of $237.1 million of the Term Loan, modification of $62.9 million of the Term Loan, and new borrowings of $137.1 million from new BlackRock participation. The resulting principal amount under the Amended Term Loan is ~~January~~$200.0 million 27and has a maturity date of October 29, ~~2027~~2030. 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 9an applicable margin ranging from 5.25% to 6.00%, based upon the debt-to-capital ratio, payable quarterly.

In October 2021, we consummated the transactions contemplated by the investment agreement with Carvana, or the Investment Agreement, that we entered into on August 11, 2021. We received $126.5 million of gross proceeds from the issuance of 14.1 million shares of redeemable convertible preferred stock designated as the Series A Convertible Preferred Stock. We also issued Carvana eight tranches of warrants to purchase shares of our Class A common stock. In connection with the Investment Agreement, we incurred issuance costs of $19.6 million. As of December 31, 2023, there was $3.0 million of unpaid issuance costs contingent upon certain warrant vesting milestones in connection with the Investment Agreement.

Liquidity

As of December 31, ~~2023~~2024, we had $~~678~~599.73 million in cash and cash equivalents, of which $~~507~~333.30 million was held outside of regulated insurance entities. We also had $~~166~~306.8 million in marketable securities.

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, ~~residential~~ and ~~commercial mortgage~~asset-backed securities~~, and other debt obligations~~.

We believe that our existing cash and cash equivalents, marketable securities and cash flow from operations will be sufficient to support short-term working capital and capital expenditure requirements for at least the next 12 months and for the foreseeable future thereafter.

Our long-term capital requirements depend on many factors, including our insurance premium growth rate, rate adequacy, level of marketing spend, renewal activity, the timing and the amount of cash received from customers, the performance of our products, including the success of our partnership channel, loss cost trends, the timing and extent of spending to support development efforts, the introduction of new and enhanced products, the continuing market adoption of offerings on our platform, operating costs, and the ongoing uncertainty in global markets.

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AUnder ~~cash~~the ~~expenditure~~Amended ~~related~~Term toLoan, ~~employee~~our ~~compensation~~debt ~~expense~~covenants ofrequire ~~$8.3~~cash ~~million,~~and ~~which~~cash ~~was~~equivalents ~~dependent~~held ~~upon~~in ~~continuous~~entities ~~employment~~other ~~for~~than ~~certain~~our ~~employees,~~insurance ~~occurred~~subsidiaries into ~~January~~be ~~2024~~at least $50.0 ~~For~~million ~~additional~~at ~~information~~all ~~regarding~~times. ~~organizational~~We ~~realignment~~continue ~~and~~to ~~involuntary~~have ~~workforce~~the ~~reductions~~same ~~refer~~available tocapital ~~Note 10,~~under ~~“Restructuring~~the ~~Costs,”~~Amended inTerm ~~the~~Loan ~~Notes~~as towe ~~Consolidated~~did ~~Financial~~in ~~Statements~~the Term Loan.

Currently, our debt covenants require cash and cash equivalents held in entities other than our insurance subsidiaries to be at least $200.0 million at all times. This threshold may be reduced to $150.0 million under two sets of circumstances: issuing 62,500 insurance policies through our Carvana embedded product and achieving a ratio of direct contribution to gross premiums earned of 12%; or ceasing any customer acquisition spend outside of the Carvana commercial agreement and reducing our monthly cash burn to no greater than $12.0 million.

Through prudent deployment of capital we believe we have sufficient resources, and access to additional debt and equity capital, to adequately meet our obligations as they come due.

Cash Flows

The following table summarizes our cash flow data for the periods presented:

	For the Years Ended December 31,
	2023		2022		2021
	2024		2023		2022
	(in millions)
Net cash used in operating activities	$	(33.6)	$	(210.6)	$	(403.4)
Net cash provided by (used in) operating activities	$	195.7	$	(33.6)	$	(210.6)
Net cash (used in) provided by investing activities	(45.7)		(16.6)		76.9
Net cash used in investing activities	(154.4)		(45.7)		(16.6)
Net cash (used in) provided by financing activities	(4120.17)		~~283~~(4.31)		~~(80~~283.3)

Comparison of Years Ended December 31, 2024 and 2023

Net cash provided by operating activities for the year ended December 31, 2024 was $195.7 million compared to $33.6 million of net cash used in operating activities for the year ended December 31, 2023. The change in operating activities was due to higher net income between periods, an increase in the net loss and LAE reserves as a result of growth in policies in force and timing of premium receipts and reinsurance payments. This was partially offset by change in premiums not yet earned due to growth, timing of reinsurance receipts and the impact of commuting certain agreements with reinsurers in 2023.

Net cash used in investing activities for the year ended December 31, 2024 was $154.4 million, compared to $45.7 million for the year ended December 31, 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.

Net cash used in financing activities for the year ended December 31, 2024 was $120.7 million, compared to $4.1 million for the year ended December 31, 2023. The increase in cash used in financing activities was primarily due to a partial repayment of the extinguished Term Loan and tax withholding obligations arising from the vesting of equity awards. This was partially offset by net proceeds from the Amended Term Loan.

Comparison of Years Ended December 31, 2023 and 2022

~~Net~~The ~~cash used in operating activities for the year ended~~ December 31, 2023 ~~was~~and ~~$33.6~~2022 ~~million compared to $210.6 million of~~ net cash ~~used~~discussion incan ~~operating~~be ~~activities~~found ~~for~~in ~~the~~Part ~~year ended December 31~~II, ~~2022.~~Item ~~The decrease in cash used in operating activities was due to a decline in net loss~~7, ~~primarily~~“Liquidity ~~due to an increase in net premiums earned~~ and ~~initiatives~~Capital ~~that reduced operating costs~~Resources,” ~~including~~of our ~~prior~~Annual ~~year~~Report ~~organizational~~on ~~realignment~~Form ~~and involuntary workforce reductions that reduced payroll, employee~~10-~~related expenditures and facility costs~~K. Further, this was impacted by a strategic reduction of quota share reinsurance and commuting certain agreements with reinsurers. This was partially offset by timing of claims payments and reinsurance payments during the year ended December 31, 2023 compared to the same period in 2022.

Net cash used in investing activities for the year ended December 31, 2023 was $45.7 million, compared to $16.6 million of net used in investing activities for the year ended December 31, 2022. The increase in cash used in investing activities was primarily due to purchases of investments.

Net cash used in financing activities for the year ended December 31, 2023 was $4.1 million, compared to $283.3 million of net cash provided by financing activities for the year ended December 31, 2022. The change in net cash (used in) provided by financing activities was primarily due to proceeds from our Term Loan issued in 2022.

Comparison of Years Ended December 31, 2022 and 2021

The December 31, 2022 and 2021 net cash discussion can be found in Part II, Item 7, “Liquidity and Capital Resources,” of our Annual Report on Form 10-K.

Material Cash Requirements from Contractual and Other Obligations

As of December 31, ~~2023~~2024, our material cash requirements from known contractual and other obligations consisted of purchase commitments, as discussed in Note 13, “Commitments and Contingencies,” operating leases, as discussed in Note 8, “Leases,” and aan Amended Term Loan, as discussed in Note 7, “Long-Term Debt,” in the Notes to Consolidated Financial Statements. We believe we have sufficient resources, and access to additional debt and equity capital, to adequately meet our obligations as they come due.

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Critical Accounting Estimates

Our financial statements are prepared in accordance with GAAP. The preparation of the 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 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~~the ~~for~~amount ~~expected~~of ~~credit~~reinsurance ~~losses~~recoverable onand ~~premium~~receivable ~~receivables~~from ~~and~~ reinsurance ~~recoverables~~contracts. 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.

We believe that the accounting estimates described below involve a significant degree of judgment and complexity. Accordingly, we believe these are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. For further information, see Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements.

Loss and LAE Reserves

Loss and LAE reserves represent management’s best estimate of the ultimate liability for all reported and unreported claims that occurred prior to the end of each accounting period but have not yet been paid. These reserves are established to cover the estimated ultimate cost to settle insured losses. Loss and LAE reserves include an amount determined using adjuster determined case-base estimates for reported claims and on actuarial unpaid claim estimates using past experience and historical emergence patterns for unreported loss and LAE. Case reserve amounts are determined by claims adjusters following our case reserving practices, which consider the circumstances presented with each claimant, applicable policy provisions, and state law. The unpaid claim estimates consider loss cost trends, mix of business, and other risk factors impacting claims settlement. The methods used to estimate ultimate loss reserves by accident month include reported loss development, paid loss development, expected loss ratio, frequency-severity, premium based Bornhuetter/Ferguson, or B/F, and exposure based B/F using frequency-severity. The method used to estimate unpaid LAE reserves is determined by a transaction-based allocation method where historical claim department activities are measured by their relative effort or cost for handling different claim types. Our estimation for unpaid LAE reserves includes the ultimate cost of settling a range of claim types from express material damage claims to more complex bodily injury cases.

The evaluation and estimation of ultimate losses and LAE requires considerable judgment in understanding how claims mature, how claims differ between lines of business, and how changes in the business impact claims settlement over time. Loss reserves represent a liability estimate at a given point in time based on many input variables including historical and statistical information, inflation, contract interpretation, weather catastrophe impacts, regulatory environment, and economic conditions. While we consider many inputs into the loss reserve valuation process, as well as several actuarial methodologies, there is no single method for determining the exact ultimate claims liability. In many cases, we use multiple estimation methods based on the particular facts and circumstances of the claims and liabilities being evaluated, resulting in a range of reasonable estimates for reserves for losses and LAE. We do not discount reserves.

Our actuarial reserving team performs monthly reviews of the claims experience and loss emergence to support our estimation of ultimate losses and LAE. A few considerations and assumptions in estimating ultimate claim liabilities includes relative case reserve adequacy over time, claims cycle time, claims settlement practices, exposure growth, actuarial projections, current economic conditions, driving patterns observed from telematics, weather catastrophes, and claim litigation. Our loss reserves can be grouped by claim type, where amounts related to material damage of vehicles and property tend to settle within six to 12 months, while claims that involve injuries or personal liability have a much longer time period between the occurrence of a loss and the settlement of the claim. In general, the longer the time span between the incidence of a loss and the settlement of the claim, the more the ultimate settlement amount can vary.

Because actual experience can differ from key assumptions used in establishing reserves, there is potential for significant variation in the development of loss reserves. There is considerable uncertainty associated with the actuarial estimates, and therefore the actual losses and LAE paid in the future may differ materially from the reserves we have recorded. Our loss estimates are continually reviewed by management and adjusted as necessary; with adjustments included in the period determined.

The key assumptions that materially affect the estimate of the reserves for loss and LAE are as follows:

•Many of the actuarial estimation methods assume that the speed of claim payments and claim closures, also known as cycle time, remains relatively consistent over time. While fluctuations and improvements in cycle time are expected as we grow, these timing changes can be difficult to discern from normal process risk variability in the data.

•For actuarial methods that rely on case reserve data, there is an implicit assumption that the adequacy of case reserve estimates stays relatively constant over time. For example, if the held case reserves represent the 50th percentile outcome for each claim, then any changes to this case reserve level, either higher or lower, would impact the ultimate loss estimates.

•Actuarial methods that rely on exposure bases, such as premiums or car years, perform better when the mix of business is relatively stable over time. Business growth can change the mix of business across several dimensions: new business versus renewal, geography profile, and underwriting profile. As such, prior estimates of claim frequency, claim severity, or loss ratio may not be as predictive of future results when the mix of business changes.

•Broader macro -level economics can have a material impact on loss reserve estimates, such as a rapid change in miles driven, unanticipated inflation, regulatory restrictions, and legal developments as they relate to contract and coverage interpretation and enforceability.

Due to the inherent uncertainty in determining our ultimate cost of settling claims, we evaluate what the potential impact on consolidated results of operations, financial position, and liquidity would be based on a hypothetical 5% and 10% increase or decrease in key assumptions described above. The loss reserve range ~~noted~~estimated below represents a range of reasonably likely reserves, not a range of all possible ~~reserves~~outcomes. Therefore, the ultimate losses could reach levels ~~corresponding to reserve amounts~~ outside of the range provided. Given ~~our~~the growth in exposures from inception in 2015, we believe evaluating sensitivity based on a hypothetical increase or decrease of 5% and 10% isreflects ~~reflective of~~ management’s best estimate and provides ana ~~illustrative~~scenario ~~range~~impact ofon the reserve ranges due to variability in key assumptions. The ~~below~~following ~~tables~~table ~~present~~summarizes this sensitivity analysis:

	Scenarios for Changes in Bodily Injury Claim Severity for all Accident Years
	Scenarios for Changes in Loss Reserves for all Accident Years
	(10)%		(5)%		—%		5%		10%
Bodily injury liability	$	~~104~~158.86	$	~~110~~167.74	$	~~116~~176.52	$	~~122~~185.30	$	~~128~~193.18
Uninsured and underinsured bodily injury	2126.86		2328.0		2429.25		2531.40		2632.75
All other coverages	59.0		59.0		59.0		59.0		59.0
Property damage	52.0		54.9		57.8		60.7		63.6
Total losses—net of reinsurance	$	185.6	$	192.7	$	199.7	$	206.7	$	213.8
All other coverages	37.4		37.4		37.4		37.4		37.4
Total loss reserves—net of reinsurance	$	274.6	$	287.7	$	300.9	$	314.1	$	327.3

Our loss and LAE reserves are recorded net of external reinsurance and net of amounts expected to be received from salvage (the amount recovered from the damaged property after we pay for a total loss) and subrogation (the right to recover payments from third parties).

81Reinsurance Recoverable and Receivable

~~Premium~~We ~~Revenue~~also estimate the amount of reinsurance recoverable and receivable from reinsurance contracts. Reinsurance assets include reinsurance recoverable and receivable on unpaid loss and LAE reserves, ~~Fee~~which ~~Income~~are estimated as part of our loss reserving process and ~~Related~~are ~~Expenses~~subject to similar judgments and uncertainties. Estimating these amounts involves significant judgment, with key considerations including:

~~Premiums~~•paid ~~written are deferred~~ and ~~earned~~unpaid ~~pro~~amounts rata over the policy period. Unearned premium is established to cover the unexpired portion of premiums written. A premium deficiency, as measured on a gross basis, is recorded when the sum of expected losses, LAE, unamortized acquisition costs and maintenance costs exceed the recorded unearned premium reserve and anticipated investment income. A premium deficiency reserve is recognized as a reduction of deferred policy acquisition costs and, if necessary, by accruing an additional liability for the deficiency, with a corresponding charge to operations. We did not record a premium deficiency reserve in 2023, 2022 or 2021.recoverable;

We•any ~~have~~balances ain ~~fronting~~dispute ~~arrangement with an unaffiliated Texas county mutual insurance company,~~ or ~~the~~subject ~~fronting carrier. We route all of our new auto policies, and, over time, expect~~ to ~~route~~legal certain renewal auto policies, in Texas through the fronting carrier whereby we assume 100% of the related premium and losses on those policies. The fronting arrangement allows us to have greater rating and underwriting flexibility. Premiums assumed are deferred and earned pro rata over the policy period. Unearned premium is established to cover the unexpired portion of premiums assumed.collection;

Premiums receivable represents premiums written but not yet collected. Generally, premiums are collected prior to providing risk coverage, minimizing our exposure to credit risk. Due to a variety of factors, certain premiums billed may not be collected, for which we establish an allowance for doubtful accounts based primarily on an analysis of historical collection experience, adjusted for current economic conditions. Allowance for credit losses was $4.0 million and $2.8 million as of December 31, 2023 and 2022, respectively, on •the ~~consolidated~~financial ~~balance sheets. A policy is generally considered past due on the first day after its due date and policies greater than 90 days past due are written~~well-~~off.~~being ~~We recognized premium write-offs, or bad debt expense,~~ of ~~$12.5~~a ~~million,~~reinsurer; ~~$17.4 million~~ and ~~$20.9 million for the years ended December 31, 2023, 2022 and 2021 respectively.~~

~~For those policyholders who pay premiums on an installment basis, we charge a flat fee for each installment related to~~ •the ~~additional~~likelihood ~~administrative~~of ~~costs~~collection ~~associated~~of ~~with processing more frequent billings. We recognize this fee income in~~ the ~~period~~reinsurance ~~which~~recovery weconsidering ~~process~~factors ~~each~~such ~~installment. We also charge policy fees~~as, ~~which~~amounts ~~are~~outstanding ~~typically~~and ~~nonrefundable~~length ~~fees that are intended to reimburse a portion~~ of ~~the~~collection ~~costs incurred to underwrite the policy~~periods. This fee income is recognized ratably over the policy coverage period. In addition, we charge late payment fees that are collected from our policyholders. This fee income is recognized in the period in which we process the late payment.

Deferred policy acquisition costs, which consists of premium taxes, certain marketing costs and underwriting expenses, and commission expenses related to our partnership channel, net of ceding commissions, related to the successful acquisition of new or renewal business, are deferred and amortized over the same period in which the related premiums are earned. Ceding commissions relating to reinsurance agreements are recorded as a reimbursement for both deferrable and non-deferrable acquisition costs. The portion of the ceding commission that is equal to the pro rata share of acquisition costs based on quota share percentage is recorded as an offset to the gross deferred policy acquisition costs. Any portion of the ceding commission that exceeds the acquisition costs of the business ceded is recorded as excess ceding commission, a deferred liability, and amortized over the same period in which the related premiums are earned. 84

Reinsurance

In the ordinary course of business, we cede and retrocede a portion of our business written and assumed, respectively, to reinsurers to limit the maximum net loss potential arising from large risks and catastrophes. These arrangements, known as treaties, provide for reinsurance coverage on quota-share and excess-of-loss basis. All reinsurance contracts provide for indemnification against loss or liability relating to insurance risk and have been accounted for as reinsurance. Although the ceding of reinsurance does not discharge us from our primary liability to the policyholder, the insurance company that assumes the coverage assumes the related liability. Amounts recoverable from and payable to reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured business. Reinsurance premiums, commissions and expense reimbursements related to reinsured business are accounted for on a basis consistent with the basis used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums ceded to other companies have been reported as a reduction of premiums earned and are recognized over the remaining policy period based on the reinsurance protection provided. Amounts applicable to reinsurance ceded for unearned premium reserves are reported as a prepaid reinsurance premiums asset in the accompanying consolidated balance sheets and as a reduction of unearned premiums in Note 6, “Reinsurance,” in the Notes to Consolidated Financial Statements. Ceding commissions earned in connection with reinsurance ceded have been accounted for as a reduction of other insurance expense (benefit) in the consolidated statements of operations and comprehensive loss.

Some of our reinsurance agreements provide for the amount of coverage based on loss experience, referred to as loss corridors and loss ratio caps. We recognize the asset or liability arising from these adjustable features in the period the adjustment occurs, which is calculated based on experience to-date under the agreement.

In the event that all or any of the reinsuring companies might be unable to meet their obligations under existing reinsurance agreements, we would be liable for such defaulted amounts. We evaluate and monitor the financial condition associated with our reinsurers in order to minimize our exposure to significant losses from reinsurer insolvencies. We obtain reinsurance from a diverse group of global reinsurers and monitor concentration as well as financial strength ratings of the reinsurers to minimize counterparty credit risk. For our reinsurance partners who are not rated, we require adequate levels of collateral or letters of credit to be available to us in the event of downside scenarios. To recognize this risk of credit loss, we have established an allowance for credit losses based on the probability of default and the expected loss given default as influenced by factors such as the reinsurer’s credit rating and average life of our reinsurance recoverables. Allowance for credit losses was $1.8 million and $0.2 million as of December 31, 2023 and 2022, respectively.

Recoverability of Net Deferred Tax Assets

We calculate the tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities in accordance with Accounting Standards Codification 740, Income Taxes, or ASC 740. The application of ASC 740 requires a company to evaluate the recoverability of deferred tax assets and to establish a valuation allowance if necessary to reduce the carrying value of the deferred tax asset to an amount that is more likely than not to be realized. Considerable judgment is required in determining whether a valuation allowance is necessary and, if so, the amount of such valuation allowance. In evaluating the need for a valuation allowance we consider many factors, including: (1) the nature of the deferred tax assets and liabilities; (2) whether they are ordinary or capital; (3) the timing of expected reversal; (4) taxable income in prior carry back years as well as projected taxable earnings exclusive of reversing temporary differences and carry forwards; (5) the length of time that carryovers can be used; (6) unique tax rules that would impact the utilization of the deferred tax assets; and (7) any tax planning strategies that we would employ to avoid a tax benefit expiring unused.

We may be unable to fully use our net operating losses, or NOLs, if at all. Under Section 382 of the Internal Revenue Code, or the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change, by value, in the corporation’s equity ownership by certain shareholders or groups of shareholders over a rolling three-year period), the corporation’s ability to use its pre-ownership change NOLs to offset its post-ownership change income may be limited. The limitation may be such that it prevents the Company from fully utilizing its NOLs existing at the time of the ownership change prior to their expiration, which could also result in a substantial reduction in the deferred tax asset. We currently carry a valuation allowance against our entire net deferred tax asset. As such, any reduction in the deferred tax asset would also result in an offsetting reduction in the valuation allowance.

We have experienced an ownership change. In connection with this ownership change, we do not expect that the limitation under Section 382 of the Code will result in any material reduction in our ability to use pre-ownership change NOLs in the future nor require a reduction in the associated deferred tax asset (or adjustment to the valuation allowance). We may still experience additional ownership changes in the future as a result of subsequent shifts in ownership, which could result in additional limitations on our NOL usage.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to certain interest and credit rate risks as part of our ongoing business operations.

Interest Rate Risk

We are exposed to interest rate risk on our investment portfolio. Interest rate risk is the risk that we will incur losses due to adverse changes in interest rates relative to the interest rate characteristics of interest bearing assets and liabilities. Our fixed maturity investments include U.S. Treasury securities, municipal securities, corporate debt securities, ~~residential~~and ~~mortgage~~asset-backed securities, ~~commercial mortgage-backed securities, and other debt obligations portfolio,~~ most of which are exposed to changes in prevailing interest rates and which may experience moderate fluctuations in fair value resulting from changes in interest rates. The fair market value of a portfolio of debt securities increases or decreases inversely with changes in market interest rates, while net investment income realized from future investments in debt securities increases or decreases along with interest rates. We monitor this exposure through periodic reviews of investment portfolio by our management.

We are also exposed to interest rate risk through our ~~term~~Amended ~~loan~~Term Loan facility which incurs interest at floating rates based on changes in the SOFR. Rising interest rates could have an adverse impact on the cost of debt and results in less cash available to utilize in our operations, and could have a material adverse effect on our business and financial condition. A 1% fluctuation in SOFR would not have significantly impacted interest expense during ~~2023~~2024.

Credit Risk

We are exposed to credit risk on our investment portfolio, ~~and our~~ reinsurance contracts, and premiums receivable. Credit risk results from uncertainty in a counterparty’s ability to meet its obligations. We monitor our investment portfolio to ensure that credit risk does not exceed prudent levels. We manage the exposure to credit risk in our U.S. Treasury securities, municipal securities, corporate debt securities, ~~residential~~and ~~mortgage~~asset-backed securities, ~~commercial mortgage-backed securities, and other debt obligations~~ portfolio by investing in high credit quality, investment grade securities and diversifying our holdings. We manage the exposure to credit risk in our reinsurance contracts by obtaining reinsurance from a diverse group of reinsurers and monitoring concentration as well as financial strength ratings of the reinsurers to minimize counterparty credit risk. For certain reinsurance partners who are not rated, we require adequate levels of collateral or letters of credit to be available to us in the event of downside scenarios. We manage the exposure to significant losses on our premiums receivable through strategic initiatives focusing on improved customer communication, policy renewal adjustments, and risk segmentation.

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Item 8. Financial Statements and Supplementary Data

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
			Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 34)			8688
Consolidated Balance Sheets			8890
Consolidated Statements of Operations and Comprehensive Loss			89
Consolidated Statements of Operations and Comprehensive Income (Loss)			91
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity			9092
Consolidated Statements of Cash Flows			9193
Notes to Consolidated Financial Statements			9294
Schedule II: Condensed Combined Financial Information of Registrant			129
Schedule V: Valuation and Qualifying Accounts			133

Schedules, other than those listed above, are omitted for the reason that they are not required, are not applicable or that equivalent information has been included in the consolidated financial statements or notes thereto or elsewhere herein.

8587

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Root, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Root, Inc. and subsidiaries (the "Company") as of December 31, ~~2023~~2024 and ~~2022~~2023, the related consolidated statements of operations and comprehensive income (loss), redeemable convertible preferred stock and stockholders' equity, and cash flows, for each of the three years in the period ended December 31, ~~2023~~2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2023~~2024 and ~~2022~~2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2023~~2024, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, ~~2023~~2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 2126, ~~2024~~2025, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Loss and Loss Adjustment Expense Reserves – Refer to Notes 2 and 5 to the financial statements

Critical Audit Matter Description

Loss and loss adjustment expense reserves ~~represents~~represent the liability established to cover the estimated ultimate cost to settled insured losses. The Company’s estimation of the liability for loss and loss adjustment expense reserves is complex and includes subjective considerations and management’s judgement.

Loss and loss adjustment expense reserves are inherently uncertain. Because actual experience can differ from key assumptions used in establishing reserves, there is potential for significant variation in the development of loss

8688

reserves, particularly related to those reserves where there is a longer time span between the incidence of a loss and the settlement of a claim. Given the subjectivity in estimating the ultimate loss and loss adjustment expense reserves, due to input variables such as historical and statistical information, inflation, contract interpretation, weather catastrophe impacts, regulatory environment, and economic conditions, among other factors, auditing loss and loss adjustment expense reserves, particularly related to those reserves with settlement over a longer period of time, involved an especially high degree of auditor judgment, including the need to involve our actuarial specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to loss and loss adjustment expense reserves included the following, among others:

•We tested the effectiveness of controls related to loss and loss adjustment expense reserves, including those over the Company’s actuarial estimate.

•We tested the completeness and accuracy of the underlying key data inputs that served as the basis for the actuarial estimate.

•With the assistance of our actuarial specialists, we used the Company’s claims data to develop a range of independent estimates for the loss and loss adjustment expense reserves, particularly related to those with settlement over a longer period of time. We used these independent estimates to assess the reasonableness of the Company’s reserves by comparing our estimates to the Company’s recorded loss and loss adjustment expense reserves.

•We compared the Company’s prior year estimates of expected loss and loss adjustment expense reserves to actual experience during the current year to identify potential bias in the determination of loss and loss adjustment expense reserves.

/s/ DELOITTE & TOUCHE LLP Columbus, Ohio February 2126, ~~2024~~2025

We have served as the Company's auditor since 2017.

ROOT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2023 AND 2022
	2023		2022
	(in millions, except par value)
Assets
Investments:
Fixed maturities available-for-sale, at fair value (amortized cost: $168.4 and $134.2 at December 31, 2023 and December 31, 2022, respectively)	$	165.9	$	128.4
Short-term investments (amortized cost: $0.9 and $0.4 at December 31, 2023 and December 31, 2022, respectively)	0.9		0.4
Other investments	4.4		4.4
Total investments	171.2		133.2
Cash and cash equivalents	678.7		762.1
Restricted cash	1.0		1.0
Premiums receivable, net of allowance of $4.0 and $2.8 at December 31, 2023 and December 31, 2022, respectively	247.1		111.9
Reinsurance recoverable and receivable, net of allowance of $1.8 and $0.2 at December 31, 2023 and December 31, 2022, respectively	125.3		148.8
Prepaid reinsurance premiums	48.2		74.2
Other assets	76.2		81.7
Total assets	$	1,347.7	$	1,312.9
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity
Liabilities:
Loss and loss adjustment expense reserves	$	284.2	$	287.4
Unearned premiums	283.7		136.5
Long-term debt and warrants	299.0		295.4
Reinsurance premiums payable	54.4		119.8
Accounts payable and accrued expenses	65.6		39.7
Other liabilities	83.1		45.0
Total liabilities	1,070.0		923.8
Commitments and Contingencies (Note 13)
Redeemable convertible preferred stock, $0.0001 par value, 14.1 shares issued and outstanding at December 31, 2023 and December 31, 2022 (redemption value of $126.5) (Note 11)	112.0		112.0
Stockholders’ equity:
Class A common stock, $0.0001 par value, 9.5 and 9.2 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively (Note 11)	—		—
Class B convertible common stock, $0.0001 par value, 5.0 shares issued and outstanding at December 31, 2023 and December 31, 2022 (Note 11)	—		—
Additional paid-in capital	1,883.4		1,850.7
Accumulated other comprehensive loss	(2.5)		(5.8)
Accumulated loss	(1,715.2)		(1,567.8)
Total stockholders’ equity	165.7		277.1
Total liabilities, redeemable convertible preferred stock and stockholders’ equity	$	1,347.7	$	1,312.9

See Notes to Consolidated Financial Statements

ROOT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021
	2023		2022		2021
	(in millions, except per share data)
Revenues:
Net premiums earned	$	399.9	$	285.9	$	310.3
Net investment income	30.2		6.2		5.0
Net realized gains on investments	—		0.5		2.4
Fee income	23.4		16.5		20.9
Other income	1.5		1.7		6.8
Total revenues	455.0		310.8		345.4
Operating expenses:
Loss and loss adjustment expenses	331.3		351.0		392.3
Sales and marketing	49.3		48.0		270.2
Other insurance expense (benefit)	47.6		(8.0)		5.0
Technology and development	44.8		55.5		65.5
General and administrative	83.3		127.4		97.6
Total operating expenses	556.3		573.9		830.6
Operating loss	(101.3)		(263.1)		(485.2)
Interest expense	(46.1)		(34.6)		(20.0)
Loss on early extinguishment of debt	—		—		(15.9)
Loss before income tax expense	(147.4)		(297.7)		(521.1)
Income tax expense	—		—		—
Net loss	(147.4)		(297.7)		(521.1)
Other comprehensive income (loss):
Changes in net unrealized gains (losses) on investments	3.3		(6.2)		(5.2)
Comprehensive loss	$	(144.1)	$	(303.9)	$	(526.3)
Loss per common share: basic and diluted (both Class A and B)	$	(10.24)	$	(21.11)	$	(37.76)
Weighted-average common shares outstanding: basic and diluted (both Class A and B)	14.4		14.1		13.8

See Notes to Consolidated Financial Statements

ROOT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
CONSOLIDATED BALANCE SHEETS
FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021
AS OF DECEMBER 31, 2024 AND 2023
	Redeemable Convertible Preferred Stock					Class A and Class B Convertible Common Stock				Treasury Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Loss		Total Stockholders' Equity
	2024			2023
	Shares			Amount		Class A Shares	Class B Shares	Amount		Shares	Amount
	(in millions, except par value)
						(in millions)
Assets
Balance—January 1, 2021	—			$	—	3.3	10.7	$	—	0.3	$	(0.8)	$	1,775.6	$	5.6	$	(749.0)	$	1,031.4
Investments:
Net loss	—			—		—	—	—		—	—		—		—		(521.1)		(521.1)
Fixed maturities available-for-sale, at fair value (amortized cost: $294.3 and $168.4 at December 31, 2024 and December 31, 2023, respectively)	$	292.0		$	165.9
Other comprehensive loss	—			—		—	—	—		—	—		—		(5.2)		—		(5.2)
Short-term investments (amortized cost: $14.8 and $0.9 at December 31, 2024 and December 31, 2023, respectively)	14.8			0.9
Conversion of Class B to Class A common stock	—			—		4.5	(4.5)	—		—	—		—		—		—		—
Other investments	4.4			4.4
Common stock—option exercises and restricted stock units vesting, net of shares withheld for employee taxes	—			—		0.1	—	—		—	—		4.4		—		—		4.4
Total investments	311.2			171.2
Reclassification of early-exercised stock option to liabilities	—			—		—	(0.1)	—		—	—		(0.2)		—		—		(0.2)
Cash and cash equivalents	599.3			678.7
Common stock—share-based compensation expense	—			—		—	—	—		—	—		19.3		—		—		19.3
Restricted cash	1.0			1.0
Warrant compensation expense	—			—		—	—	—		—	—		8.8		—		—		8.8
Premiums receivable, net of allowance of $9.8 and $4.0 at December 31, 2024 and December 31, 2023, respectively	305.3			247.1
Retirement of treasury shares	—			—		—	—	—		(0.3)	0.8		(0.8)		—		—		—
Reinsurance recoverable and receivable, net of allowance of $0.1 and $1.8 at December 31, 2024 and December 31, 2023, respectively	150.6			125.3
Preferred stock issued	14.1			126.5		—	—	—		—	—		—		—		—		—
Prepaid reinsurance premiums	25.1			48.2
Preferred stock and related warrants issuance costs	—			(14.5)		—	—	—		—	—		(1.0)		—		—		(1.0)
Other assets	103.2			76.2
Balance—December 31, 2021	14.1			$	112.0	7.9	6.1	$	—	—	$	—	$	1,806.1	$	0.4	$	(1,270.1)	$	536.4
Total assets	$	1,495.7		$	1,347.7
Net loss	—			—		—	—	—		—	—		—		—		(297.7)		(297.7)
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity
Other comprehensive loss	—			—		—	—	—		—	—		—		(6.2)		—		(6.2)
Liabilities:
Conversion of Class B to Class A common stock	—			—		1.1	(1.1)	—		—	—		—		—		—		—
Loss and loss adjustment expense reserves	$	413.2		$	284.2
Common stock—option exercises and restricted stock units vesting, net of shares withheld for employee taxes	—			—		0.2	—	—		—	—		0.4		—		—		0.4
Unearned premiums	353.9			283.7
Reclassification of early-exercised stock option from liabilities	—			—		—	—	—		—	—		0.2		—		—		0.2
Long-term debt and warrants	200.1			299.0
Common stock—share-based compensation expense	—		<

Filing Compare · Root, Inc.