What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-25 compared with 2025-02-26 · 332 added, 338 removed, 1029 unchanged (39% of the section changed)

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Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive I ncome ( Loss )

Consolidated Statements of Operations and Comprehensive Income (Loss )

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity

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We have audited the accompanying consolidated balance sheets of Root, Inc.

and subsidiaries (the "Company") as of December 31, 2024 and 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, 2024, and the related notes (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of December 31, 2025 and 2024, 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, 2025, and the related notes and the schedules listed in the Index at Item 8 (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, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

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Critical Audit Matter Description

Loss and loss adjustment expense reserves 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 represent the liability established to cover the estimated ultimate cost to settle 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 judgment.

Loss and loss adjustment expense reserves are inherently uncertain.

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Short-term investments (amortized cost:

$ 14.8 and $ 0.9 at December 31, 2024 and December 31, 2023, respectively)

zero and $ 14.8 at December 31, 2025 and December 31, 2024, respectively)

Other investments 4.4 4.4

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Cash and cash equivalents 669.3 599.3

Restricted cash 1.0 1.0

Restricted cash and cash equivalents

Premiums receivable, net of allowance of $ 8.9 and $ 9.8 at December 31, 2025 and December 31, 2024, respectively

Reinsurance recoverable and receivable, net of allowance of $ 0.1 and $ 1.8 at December 31, 2024 and December 31, 2023, respectively

Reinsurance recoverable and receivable, net of allowance of $ 0.1 at December 31, 2025 and December 31, 2024

Prepaid reinsurance premiums 6.3 25.1

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Unearned premiums 393.7 353.9

Long-term debt and warrants 200.1 299.0

Long-term debt 200.3 200.1

Reinsurance premiums payable 2.4 32.8

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Additional paid-in capital 1,922.0 1,887.9

Accumulated other comprehensive loss

( 2.3 ) ( 2.5 )

Accumulated other comprehensive income (loss) 3.9 ( 2.3 )

Accumulated loss ( 1,641.6 ) ( 1,681.9 )

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Net investment income 33.7 35.9 30.2

Net realized gains on investments — — 0.5

Fee income 78.3 66.0 23.4

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Sales and marketing 174.8 135.8 49.3

Other insurance expense (benefit) 106.4 47.6 ( 8.0 )

Other insurance expense 206.3 106.4 47.6

Technology and development 53.1 53.3 44.8

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Net income (loss) 40.3 30.9 ( 147.4 )

Changes in net unrealized gains (losses) on investments 0.2 3.3 ( 6.2 )

Changes in net unrealized gains on investments 6.2 0.2 3.3

Comprehensive income (loss) $ 46.5 $ 31.1 $ ( 144.1 )

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Redeemable Convertible Preferred Stock Class A and Class B Convertible Common Stock

Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Loss Total Stockholders' Equity

Additional Paid-In Capital Accumulated Other Comprehensive(Loss) Income Accumulated Loss Total Stockholders' Equity

Shares Amount Class A Shares Class B Shares Amount

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Net loss — — — — — — — ( 147.4 ) ( 147.4 )

Other comprehensive loss — — — — — — ( 6.2 ) — ( 6.2 )

Conversion of Class B to Class A common stock — — 1.1 ( 1.1 ) — — — — —

Other comprehensive income — — — — — — 3.3 — 3.3

Common stock—option exercises and restricted stock units vesting, net of shares withheld for employee taxes — — 0.3 — — — — — —

Reclassification of early-exercised stock option to liabilities — — — — — 0.2 — — 0.2

Reclassification of early-exercised stock option from liabilities — — — — — 0.1 — — 0.1

Common stock—share-based compensation expense — — — — — 17.3 — — 17.3

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Warrant issuance costs — — — — — ( 2.1 ) — — ( 2.1 )

Term Loan warrants issued — — — — — 0.6 — — 0.6

Balance—December 31, 2023 14.1 $ 112.0 9.5 5.0 $ — $ 1,883.4 $ ( 2.5 ) $ ( 1,715.2 ) $ 165.7

Net loss — — — — — — — ( 147.4 ) ( 147.4 )

Net income — — — — — — — 30.9 30.9

Other comprehensive income — — — — — — 0.2 — 0.2

Conversion of Class B to Class A common stock — — 1.0 ( 1.0 ) — — — — —

Common stock—option exercises and restricted stock units vesting, net of shares withheld for employee taxes

— — 0.6 — — ( 17.4 ) — 2.4 ( 15.0 )

Reclassification of early-exercised stock option from liabilities

— — — — — 0.1 — — 0.1

Common stock—share-based compensation expense — — — — — 18.5 — — 18.5

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Warrant compensation expense — — — — — 19.2 — — 19.2

Warrants issuance costs — — — — — ( 0.4 ) — — ( 0.4 )

Balance—December 31, 2025 14.1 $ 112.0 13.7 1.8 $ — $ 1,922.0 $ 3.9 $ ( 1,641.6 ) $ 284.3

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2025 2024 2023

(in millions)

(dollars in millions)

Cash flows from operating activities:

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Loss on extinguishment of debt

Net realized gains on investments — — ( 0.5 )

Gain on lease modification — — ( 0.3 )

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Sales of investments 2.0 0.6 2.2

Purchases of indefinite-lived intangible assets and transaction costs — — ( 1.3 )

Capitalization of internally developed software ( 14.1 ) ( 11.4 ) ( 9.2 )

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Repayments of long-term debt — ( 237.1 ) —

Net cash (used in) provided by financing activities ( 120.7 ) ( 4.1 ) 283.3

Net (decrease) increase in cash, cash equivalents and restricted cash ( 79.4 ) ( 83.4 ) 56.1

Cash, cash equivalents and restricted cash at beginning of year 679.7 763.1 707.0

Cash, cash equivalents and restricted cash at end of year $ 600.3 $ 679.7 $ 763.1

Net cash used in financing activities ( 25.2 ) ( 120.7 ) ( 4.1 )

Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents

89.6 ( 79.4 ) ( 83.4 )

Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of year

600.3 679.7 763.1

Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of year $ 689.9 $ 600.3 $ 679.7

See Notes to Consolidated Financial Statements

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NATURE OF BUSINESS

is a holding company which, directly or indirectly, maintains 100% ownership of each of its subsidiaries, including, among others, Root Insurance Company and Root Property & Casualty Insurance Company, or Root Property & Casualty, both Ohio-domiciled insurance companies, Root Florida Insurance Company, a Florida-domiciled insurance company, which was formed in 2025, and Root Reinsurance Company, Ltd., a Cayman Islands-domiciled reinsurance company, together with Root, Inc., “we,” “us” or “our.”

is a holding company which, directly or indirectly, maintains 100 % ownership of each of its subsidiaries, including, among others, Root Insurance Company, Root Property & Casualty Insurance Company, or Root Property & Casualty, both Ohio-domiciled insurance companies, Root Florida Insurance Company, or Root Florida, a Florida-domiciled insurance company formed in 2025, and Root Reinsurance Company, Ltd., a Cayman Islands-domiciled reinsurance company, together with Root, Inc., “we,” “us” or “our.”

We were formed in 2015 and began writing personal auto insurance in July 2016.

We are a technology company operating primarily a direct-to-consumer model with the majority of our personal insurance customers acquired through mobile apps.

We offer auto and renters insurance products underwritten by Root Insurance Company, Root Property & Casualty and Root Florida Insurance Company.

We are a technology company operating primarily a direct-to-consumer model with the majority of our personal insurance customers acquired through mobile apps and partnerships.

We offer auto and renters insurance products underwritten by Root Insurance Company and auto insurance only through Root Property & Casualty and Root Florida.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Actual results could differ from those estimates.

Significant estimates reflected in our consolidated financial statements include, but are not limited to, reserves for loss and loss adjustment expense, or LAE, valuation allowance on our deferred tax assets and the amount of reinsurance recoverable and receivable from reinsurance contracts.

Reverse Stock Split — In August 2022, an authorized subcommittee of our board of directors approved a reverse stock split of our Class A and Class B common stock at a ratio of 1-for-18.

On August 12, 2022, we filed a Certificate of Amendment to our Amended and Restated Certificate of Incorporation to effect a 1-for-18 reverse stock split of our Class A and Class B common stock.

As a result of the reverse stock split, every 18 shares of our issued or outstanding pre-reverse split common stock of each class were combined into one share of common stock of such class.

No fractional shares were issued upon the reverse stock split.

On August 15, 2022, our Class A common stock began trading on a split-adjusted basis on the Nasdaq Global Select Market.

In connection with the reverse stock split, there was no change to the shares authorized or in the par value per share of $ 0.0001 .

In addition, there was no change to the number of shares issued or outstanding for our Series A Preferred Stock.

The conversion price for our Series A Preferred Stock was adjusted to $ 162.00 and the exercise price and number of warrant shares for each of our outstanding warrants were also proportionately adjusted.

Accordingly, all historical per share data, number of shares outstanding and other common stock equivalents for the periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the reverse stock split.

Significant estimates reflected in our consolidated financial statements include, but are not limited to, reserves for loss and loss adjustment expense, or LAE, valuation allowances on our deferred tax assets and the amount of reinsurance recoverable and receivable from reinsurance contracts.

Legal and Other Contingencies— From time to time, we are party to litigation and legal proceedings relating to our business operations.

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We continually evaluate potential liabilities and reserves for litigation and other matters using the guidance issued in the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 450, Contingencies .

Under this guidance, we may only record reserves for a loss if, as of the date the financial

statements are issued or available to be issued, the likelihood of occurrence is deemed probable and we can reasonably estimate the amount of the loss.

Under this guidance, we may only record reserves for a loss if, as of the date the financial statements are issued or available to be issued, the likelihood of occurrence is deemed probable and we can reasonably estimate the amount of the loss.

When disclosing litigation, claims or other matters where a material loss is judged to be reasonably possible, we will disclose an estimated range of loss or state that an estimate cannot be made.

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Debt and Equity Issuance Costs —Debt and equity issuance costs, which primarily consist of advisor, legal, accounting, and other third-party fees directly related to issuing debt and equity instruments, are capitalized as other assets in our consolidated balance sheets if incurred prior to closing the related transaction.

We incurred such costs in connection with the investment agreement with Carvana Group, LLC, or Investment Agreement, that we entered into on August 21, 2021 and our $ 200.0 million six-year term loan, or Amended Term Loan, that we entered into on October 29, 2024.

We incurred such costs

in connection with our $ 200.0 million six-year term loan, or Amended Term Loan, that we entered into on October 29, 2024 and the investment agreement with Carvana Group, LLC, or Investment Agreement, that we entered into on August 21, 2021.

Upon close of the related transaction, these deferred issuance costs are generally offset against the related proceeds.

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The CODM allocates resources based on consolidated expense and forecasted expense information.

Significant expenses, which are presented on the consolidated statements of operations and comprehensive income (loss), include loss and loss adjustment expense, sales and marketing, other insurance expense (benefit) and technology and development.

Significant expenses, which are presented on the consolidated statements of operations and comprehensive income (loss), include loss and LAE, sales and marketing, other insurance expense and technology and development.

Other segment items include expenses that our CODM does not evaluate for purposes of making operating decisions.

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2025 2024 2023

(in millions)

(dollars in millions)

Supplemental disclosures:

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Federal income taxes paid — — —

Leasehold improvements - non-cash — — 0.9

Cash, Cash Equivalents and Restricted Cash —Cash consists of cash on deposit.

State income taxes paid

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents —Cash consists of cash on deposit.

Cash equivalents are short-term, highly liquid investments that typically mature within three months from the date of origination or purchase and are principally stated at amortized cost, which approximates their fair value.

Restricted cash consists of amounts held by a financial institution to satisfy letter of credit requirements for certain property leases.

Restricted cash equivalents consist of short-term, highly liquid investments held by a financial institution to maintain certain collateral requirements with an unaffiliated Texas county mutual insurance company and are stated at amortized cost, which approximates their fair value.

If checks are issued in excess of cash balances in individual bank accounts, a book overdraft shall be reclassified to accounts payable on the consolidated balance sheets.

When a check is issued whereby a disbursement account is used to write the check, but the account is not funded until the check is presented for payment this “negative cash” balance is included in cash and cash equivalents on the consolidated balance sheets, if the funding account has sufficient funds.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amount in the consolidated statements of cash flows:

As of December 31,

(in millions)

Cash and cash equivalents $ 599.3 $ 678.7

Restricted cash 1.0 1.0

Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows

$ 600.3 $ 679.7

Investments —Investments in debt securities are classified as short-term and available-for-sale fixed maturity securities and are carried at fair value with any unrealized gains and losses, net of taxes, recorded as a component of accumulated other comprehensive loss.

Management regularly reviews our securities for signs of impairment, an assessment requiring significant management judgment.

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We then assess whether the decline in value is due to non-credit related or credit related factors.

Non-credit related declines in fair value are recorded as unrealized losses in accumulated other comprehensive loss.

If we determine that the decline is credit related, we establish an allowance for credit losses equal to the difference between the discounted cash flow model and the amortized value, which is recorded in net realized gains on investments in our consolidated statements of operations and comprehensive income (loss).

Non-credit related declines in fair value are recorded as unrealized losses in accumulated other comprehensive income (loss).

If we determine that the decline is credit related, we establish an allowance for credit losses equal to the difference between the discounted cash flow model and the amortized value, the allowance would be recorded in net realized gains and losses on investments in our consolidated statements of operations and comprehensive income (loss).

This allowance may be subsequently adjusted for recoveries or further credit losses.

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We elected to account for these investments at cost minus any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or a similar investment of the same issuer.

changes are accounted for within net investment income in our consolidated statements of operations and comprehensive income (loss).

Such changes are accounted for within net investment income in our consolidated statements of operations and comprehensive income (loss).

We also invest in Low Income Housing Tax Credits, or LIHTC, projects by way of investing in a limited liability entity to offset certain state premium taxes.

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Level 3 - Financial assets and liabilities for which values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

Private equity investments that have been remeasured as of December 31, 2025 due to an observable event or impairment are classified within Level 3 of the fair value hierarchy because their estimated fair values are based on

valuation methodologies that may include a combination of the observable transaction price at the transaction date and other unobservable inputs, including volatility and the rights and obligations associated with the investments we hold.

See Note 3, “Investments,” for further information on our private equity investments.

Leases— We record leases in accordance with ASC Topic 842, Leases .

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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.

A premium deficiency, as measured on a gross basis, is recorded when the sum of expected losses, LAE, unamortized policy acquisition costs and maintenance costs exceed the recorded unearned premium reserve and anticipated investment income.

We did not record a premium deficiency reserve in 2025, 2024 or 2023.

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Other Income —Other income is primarily comprised of revenue earned from distributing website and mobile application policy inquiry leads in geographies where we do not have a presence, recognized when we generate the lead.

Sales and Marketing —Sales and marketing includes expenses related to direct performance marketing, channel media, advertising, sponsorship, experimental marketing, referral fees and certain non-commission expenses related to the partnership channel.

These expenses also include related salaries, health benefits, bonuses, employee retirement plan-related expenses and employee share-based compensation expense, or Personnel Costs, and overhead allocated based on headcount, or Overhead, related to our brand strategy, creative and business development activities and certain data science activities.

We incur sales and marketing expenses for all product offerings.

Sales and Marketing —Sales and marketing includes both acquisition and fixed expenses.

We view direct performance marketing, experimental marketing, channel media, advertising and referral fees as acquisition expenses.

We view sponsorship and related salaries, health benefits, bonuses, employee retirement plan-related expenses and employee share-based compensation expense, or Personnel Costs, and overhead allocated based on headcount, or Overhead, related to our brand strategy, creative and business development activities, certain data science activities and certain non-commission expenses related to the partnership channel as fixed expenses.

Sales and marketing costs are expensed as incurred.

Other Insurance Expense (Benefit) —Other insurance expense (benefit) includes report costs and any refunds related to these expenses, commission expenses related to our partnership channel, premium taxes which includes low income housing tax credits to offset certain state premium taxes, credit card and policy processing expenses, premium write-offs, insurance license expenses, certain warrant compensation expense related to policies originating through the integrated automobile insurance solution for Carvana’s online buying platform, and Personnel Costs and Overhead related to actuarial and certain data science activities.

Other Insurance Expense —Other insurance expense includes expenses primarily related to insurance and underwriting operations of the business and is comprised of acquisition, variable and fixed expenses.

We view report costs and refunds related to these expenses and commission expenses related to our partnership channel as acquisition costs.

We view premium taxes, credit card and policy processing expenses and premium write-offs as variable expenses.

We view insurance license expenses, warrant compensation expense related to policies originating through the integrated automobile insurance solution for Carvana’s online buying platform, or Integrated Platform, low-income housing tax credits which offset certain state premium taxes, Personnel Costs and Overhead related to actuarial and certain data science activities as fixed expenses.

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.

Other insurance expense is expensed as incurred, except for costs related to deferred policy acquisition costs that are capitalized and subsequently amortized over the same period in which the related premiums are earned.

Warrant compensation expense is recognized on a pro-rata basis considering progress toward achieving milestones for policies originated through the Integrated Platform as defined under the Carvana commercial agreement.

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 consists of software development costs related to our mobile app and homegrown information technology systems;

Technology and Development —Technology and development are 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;

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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.

General and Administrative —General and administrative expenses primarily relate to external professional service expenses;

General and Administrative —General and administrative are fixed expenses that primarily relate to external professional service expenses;

Personnel Costs and Overhead for corporate functions;

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General and administrative expenses are expensed as incurred.

Deferred Policy Acquisition Costs— Acquisition costs consist primarily 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.

Deferred Policy Acquisition Costs— Policy acquisition costs consist primarily 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.

They 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.

The portion of the ceding commission that is equal to the pro rata share of policy 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 policy 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.

Deferred policy acquisition costs, net of accumulated amortization, was $ 44.4 million and $ 29.3 million as of December 31, 2025 and 2024, respectively.

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These reserves are a liability established to cover the estimated ultimate cost to settle insured losses.

The estimation of the liability for loss and LAE reserves is complex and includes subjective considerations and management’s judgement.

The estimation of the liability for loss and LAE reserves is complex and includes subjective considerations and management’s judgment.

The actuarial methods to determine unpaid loss es timates consider loss trends, contract interpretation, mix of business, regulatory environment, economic conditions, inflation and other risk factors impacting claims settlement.

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Our loss and LAE reserves are recorded gross of reinsurance and net of amounts expected to be received from salvage (the amount recovered from a total loss claims expense) and subrogation (the right to recover payments from third parties).

Loss and LAE are recorded net of amounts ceded to reinsurers.

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.

Loss and LAE are a function of the size and term of the insurance policies we write and the loss experience associated with the underlying risks.

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 allocated to LAE.

These amounts include claims Personnel Costs, vendor expenses, software expense, internally developed software amortization, and Overhead.

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.

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.

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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 reduction of unearned premiums in Note 6, “Reinsurance.” Ceding commissions received 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 income (loss).

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 reduction of unearned premiums in Note 6, “Reinsurance.” Ceding commissions received in connection with reinsurance ceded have been accounted for as a reduction of other insurance expense in the consolidated statements of operations and comprehensive income (loss).

Some of our reinsurance agreements provide for adjustment of amount of coverage based on loss experience.

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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 evaluate and monitor the financial

condition associated with our reinsurers in order to minimize our exposure to significant losses from reinsurer insolvencies.

We obtain our reinsurance from a diverse group of reinsurers and monitor concentration as well as financial strength ratings of the reinsurers to minimize counterparty credit risk.

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 $ 0.1 million and $ 1.8 million as of December 31, 2024 and 2023, respectively.

Income Taxes —For the 2024 tax year, we will file a consolidated federal income tax return with Caret Holdings, Inc., Root Insurance Company, Root Property & Casualty, Root Lone Star Insurance Agency, Inc.

Income Taxes —For the 2025 tax year, we will file a consolidated federal income tax return with Caret Holdings, Inc., Root Insurance Company, Root Property & Casualty, Root Florida, Root Lone Star Insurance Agency, Inc.

and Root Reinsurance Company, Ltd.

The consolidated return also includes Root Insurance Agency, LLC, Root Enterprise, LLC, and Root Scout, LLC, which are disregarded entities under Caret Holdings, Inc.

The consolidated return also includes Root Insurance Agency, LLC, Root Enterprise, LLC, Root Republic Managing General Agency, LLC, Root Texas Managing General Agency, LLC, and Root Scout, LLC, which are disregarded entities under Caret Holdings, Inc.

for federal income tax purposes.

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As of December 31, 2025 and 2024, we did not have any unrecognized tax benefits for uncertain tax positions and had no accrued interest or penalties related to uncertain tax positions.

The Inflation Reduction Act of 2022 includes a corporate alternative minimum tax, or CAMT, which generally imposes a 15% minimum tax on the adjusted financial statement income, or AFSI, of large corporations whose three year average annual AFSI exceeds $1.0 billion, or applicable corporations, applies for tax years beginning after December 31, 2022.

For the year ended December 31, 2024, we nor our subsidiaries had a three year average annual AFSI exceeding $1.0 billion.

As such, we are not an applicable corporation nor subject to CAMT as of December 31, 2024.

Internally Developed Software —We review our software development activity and capitalize costs during the application development phase under ASC 350-40, Internal-Use Software.

These costs are amortized on a straight-line basis over a five-year period.

Generally, these costs are amortized on a straight-line basis over a five-year period.

Internally developed software costs are assessed for impairment at least quarterly, which also ensures that the assets are still in service.

If there are assets identified as no longer in use, the remaining unamortized costs will be fully amortized.

If there are assets identified as no longer in use or impaired, the remaining unamortized costs will be fully amortized or the asset is written off.

We amortized internally developed software of $ 8.5 million, $ 8.6 million and $ 6.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.

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When certain events or changes in operating conditions occur, an impairment assessment may be performed on the recoverability of the carrying amounts.

When assets are no longer in use or impaired, the asset and accumulated depreciation are written off.

For the years ended December 31, 2025, 2024 and 2023, depreciation expense was $ 0.2 million, $ 1.0 million and $ 1.5 million, respectively.

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Fixed assets, net $ 1.2 $ 1.8

Employee Share-Based Compensation —We award share-based compensation to our officers, directors, employees, and have also in the past awarded to certain advisors, through approval from the Compensation Committee of the board of directors.

Employee Share-Based Compensation —We award share-based compensation to our officers, directors, employees, and certain advisors, through approval from the Compensation Committee of the board of directors.

These awards have been made in the forms of stock options, service-based restricted stock units, or RSUs, market-based restricted stock units, or MRSUs, performance-based restricted stock units, or PRSUs, and restricted stock.

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For performance-based awards, expense is not recognized until it is probable that the performance condition(s) will be met.

We assess the probability of the awards vesting based on the performance conditions on a quarterly basis.

If a performance condition is improbable but later becomes probable of achievement, a catch up of expense will be recorded as if the award had been vesting on a ratable basis from the grant date.

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We generally recognize share-based compensation expense ratably over the respective vesting period.

PRSUs are expected to vest over an explicit service period of two to three years after the performance period and are dependent upon the fulfillment of both a service condition and the achievement of certain adjusted EBITDA and new writings goals during the performance period.

PRSUs granted in 2024 are expected to vest over an explicit service period of two to three years after the performance period and are dependent upon the fulfillment of both a service condition and the achievement of certain adjusted EBITDA and new writings goals during the performance period.

The actual number of PRSUs earned can vary from zero to 200 % of the target depending on goal achievement relative to the adjusted EBITDA and new writings goal matrix.

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For our awards vesting over two years , 33 % vests on the Compensation Committee certification date and approximately 8 % vests quarterly over approximately two years thereafter.

The PRSU compensation expense is recognized based on the grant date fair value of the award, which was determined using the Company’s closing stock price as of the grant date.

The expense is recognized ratably over the requisite service period.

We assess the probability of the award vesting based on the performance conditions on a quarterly basis.

The performance period for PRSUs granted in 2025 begins on January 1, 2025 and ends on December 31, 2027 and is divided into three sub-performance periods, each beginning on January 1, 2025 and ending on December 31, 2025, 2026, and 2027, respectively.

These overlapping sub-periods are one , two , and three years in duration.

The actual number of PRSUs that vest can vary from zero to 200 % of the target depending on goal achievement relative to gross accident period loss ratio and policies in force goal matrix.

Expense for each sub-performance period is recognized ratably over the requisite service period.

Awards earned in any sub-performance period vest on the Compensation Committee certification date, which is expected to be in the first quarter of the subsequent year.

The PRSU compensation expense is recognized based on the grant date fair value of the award, which was determined using the Company’s closing stock price as of the grant date.

MRSUs are expected to vest over a derived service period of one to four years and are dependent upon the fulfillment of both a service condition and the achievement of stock-price goals during the performance period, with the latter being classified as a market condition according to ASC 718, Stock Compensation .

The service condition with respect to the first tranche of MRSUs was met on April 1, 2024 and the remaining three tranches of MRSUs will be met in installments on each of the subsequent three anniversaries of that date, or Vesting Date Requirement, subject to the individual’s continued service through such dates.

The service condition with respect to the first and second tranches of MRSUs was satisfied on April 1, 2024 and April 1 2025, respectively.

The remaining two tranches of MRSUs will be met in installments on each of the subsequent two anniversaries of that date, or Vesting Date Requirement, subject to the individual’s continued service through such dates.

Stock price goals must be met on or after the respective tranche’s Vesting Date Requirement and are based on the average closing price per share of our Class A common stock over a consecutive 45 -day trading period.

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Equity volatility was derived using a blended volatility assumption of 50 % weight on Root’s historical volatility calculated from daily stock returns since IPO to the grant date and a 50 % weight based on Root’s term matched simple average peer volatility as of the valuation date because our company-specific volatility is not sufficient by itself at the time of grant.

The fair value of the MRSUs is estimated on the date of grant using a Monte Carlo simulation with Geometric Brownian Motion that uses certain inputs, assumptions and estimates, as follows:

expected term of approximately five years , based on the contractual term of the MRSUs;

risk-free interest rate of 4.06 %, based on United States Constant Maturity Yield Curve over a similar term;

dividend rate of 0.0 %, based on our historical and expected future dividend payouts;

and volatility of 76 %, and other factors.

MRSU expense is recognized via a graded vesting method over the derived service period.

In the event that both the service condition and market condition are met earlier, expense would be accelerated.

Warrant Compensation —In October 2021, we closed the Investment Agreement with Carvana that included the issuance of 14.1 million shares of redeemable convertible preferred stock designated as the Series A Convertible Preferred Stock and the issuance of eight tranches of warrants to purchase shares of the Company’s Class A common stock.

Preferred Stock and the issuance of eight tranches of warrants to purchase shares of the Company’s Class A common stock, of which three tranches expired unexercised in 2025.

As part of the Investment Agreement, we and Carvana also entered into a five-year commercial agreement whereby our auto insurance products will be embedded into the Integrated Platform.

12 unchanged sentences

If deemed probable, we recognize compensation expense on a pro-rata basis considering progress toward achieving the milestones.

If a performance

condition is no longer probable of achievement, any previously recognized compensation expense is reversed and no subsequent compensation expense is recognized until achievement is once again probable, at which point a cumulative catch-up is recognized.

If a performance condition is no longer probable of achievement, any previously recognized compensation expense is reversed and no subsequent compensation expense is recognized until achievement is once again probable, at which point a cumulative catch-up is recognized.

In determining the classification as equity, we followed guidance issued within ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging.

12 unchanged sentences

Therefore, these common stock equivalents are considered antidilutive and diluted EPS is equal to basic EPS.

Participating securities do not participate in losses and therefore are not allocated in the two-class method.

Further details are discussed in Note 15, “Loss Per Share.”

Reclassification —Certain prior-year amounts have been reclassified for comparability with the current year presentation.

These reclassifications did not have a material impact on the consolidated financial statements and Notes to Consolidated Financial Statements.

Recently Adopted Accounting Pronouncements —In November 2023, the FASB issued Accounting Standards Update, or ASU, No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, or ASU 2023-07.

This ASU looks to provide improvements to the segment disclosure by providing users with more decision-useful information about reportable segments in a public entity.

The main provisions require a company to disclose, on an annual and interim basis, significant expenses included within each reported measure of segment profit or loss, an amount for other segment items by reportable segment and a description of its composition.

It also requires all annual disclosures about a reportable segments’ profit or loss and assets to be reported on an interim basis.

Although we operate in only one reporting segment, we are still required to provide all the disclosures required by this ASU and all existing segment disclosures in Topic 280.

We adopted ASU 2023-07 on December 31, 2024 and the adoption did not have a material impact on the Notes to Consolidated Financial Statements, as noted above.

Recently Issued Financial Accounting Standards Not Yet Adopted —In November 2024, the FASB issued ASU No.

Participating securities do not

participate in losses and therefore are not allocated in the two-class method.

Further details are discussed in Note 14, “Earnings (Loss) Per Share.”

Recently Adopted Accounting Pronouncements —In December 2023, the FASB issued Accounting Standards Update, or ASU, No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, or ASU 2023-09.

This ASU looks to enhance the transparency and decision usefulness of income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

The main provisions to the rate reconciliation disclosure require public entities on an annual basis to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

The main provisions to the income taxes paid disclosure require that all entities disclose on an annual basis the amount of income taxes paid disaggregated by federal, state and foreign taxes and the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid meets a quantitative threshold.

This ASU also requires all entities to disclose income (loss) from continuing operations before income tax expense (benefit) disaggregated between domestic and foreign and income tax expense (benefit) from continuing operations disaggregated by federal, state and foreign.

ASU 2023-09 became effective for the annual reporting period beginning January 1, 2025, and we adopted the standard as of that date on a prospective basis.

The adoption did not have an impact on our results of operations or financial condition.

Recently Issued Financial Accounting Standards Not Yet Adopted —In December 2025, the FASB issued ASU No.

2025-11, Interim Reporting (Topic 270):

Narrow-Scope Improvements.

This ASU clarifies the scope of interim reporting, improves the form and content requirements for interim financial statements, and consolidates interim disclosure requirements within Topic 270.

This ASU also introduces a new disclosure principle requiring entities to disclose information about events or changes in circumstances since the last annual reporting period that have a material impact on the company.

This ASU may be applied prospectively or retrospectively with an effective date for public entities for interim periods within annual reporting periods beginning after December 15, 2027.

Early adoption is permitted.

We are currently evaluating the effects of the new standard.

We are currently evaluating the impact of this ASU.

In September 2025, the FASB issued ASU No.

2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting For Internal-Use Software .

This ASU removes references to prescriptive and sequential software development stages in the guidance and instead requires entities to capitalize software development costs once management has authorized and committed to funding the project and it is probable that the project will be completed and the software will be used for its intended function.

The guidance also requires entities to evaluate whether significant development uncertainty exists, which may delay capitalization until such uncertainty has been resolved.

This ASU also specifies that the disclosure requirements in ASC 360-10 are required for all capitalized internal-use software costs.

This ASU may be applied prospectively, retrospectively, or through a modified transition approach with an effective date for all entities for annual reporting periods beginning after December 15, 2027, including interim periods within those reporting periods.

Early adoption is permitted.

We are currently evaluating the impact of this ASU.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

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This ASU looks to improve financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods.

amounts that are already required to be disclosed under current generally accepted accounting principles in the same disclosure as the other disaggregation requirements.

The main provisions require a company to disclose in the notes to the financial statements the amounts of employee compensation, depreciation, intangible asset amortization and certain other costs and expenses included in each relevant expense caption and include certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same disclosure as the other disaggregation requirements.

It also requires a company to disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively and the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses.

2 unchanged sentences

We are currently evaluating the impact of this ASU.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

This ASU looks to enhance the transparency and decision usefulness of income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

The main provisions to the rate reconciliation disclosure require public entities on an annual basis to:

disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

The main provisions to the income taxes paid disclosure require that all entities disclose on an annual basis:

the amount of income taxes paid disaggregated by federal, state and foreign taxes and the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid meets a quantitative threshold.

This ASU is to be applied on a prospective basis with an effective date for all public entities for annual periods beginning after December 15, 2024.

Early adoption is permitted.

This ASU only requires additional disclosure, will not have an impact on our results of operations or financial condition, and is not expected to have a material impact on the Notes to Consolidated Financial Statements.

The amortized cost and fair value of short-term investments and available-for-sale fixed maturity securities at December 31, 2025 and 2024 are as follows:

2 unchanged sentences

Fixed maturities:

Treasury securities and agencies $ 46.5 $ — $ — $ ( 0.3 ) $ 46.2

United States Treasury securities and agencies

$ 48.4 $ — $ 0.8 $ — $ 49.2

Municipal securities 23.0 — 0.3 ( 0.1 ) 23.2

2 unchanged sentences

Total fixed maturities $ 383.1 $ — $ 4.5 $ ( 0.6 ) $ 387.0

Short-term investments 14.8 — — — 14.8

Total $ 309.1 $ — $ 0.8 $ ( 3.1 ) $ 306.8

Amortized Cost Allowance for Expected Credit Losses Gross Unrealized Gains Gross Unrealized Losses Fair Value

1 unchanged sentence

Fixed maturities:

Treasury securities and agencies $ 14.6 $ — $ 0.1 $ ( 0.1 ) $ 14.6

United States Treasury securities and agencies

$ 46.5 $ — $ — $ ( 0.3 ) $ 46.2

Municipal securities 23.9 — 0.1 ( 0.5 ) 23.5

4 unchanged sentences

Total $ 309.1 $ — $ 0.8 $ ( 3.1 ) $ 306.8

Management reviewed the available-for-sale fixed maturity securities at each balance sheet date to consider whether it was necessary to recognize a credit loss as of December 31, 2024 and 2023.

Management reviewed the available-for-sale fixed maturity securities and short-term investments at each balance sheet date to consider whether it was necessary to recognize a credit loss as of December 31, 2025 and 2024.

We do not intend to sell the investments and it is not more likely than not that we will be required to sell the security before recovery.

Management concluded that the available-for-sale fixed maturity securities’ unrealized losses were due to non-credit related factors and, therefore, there was no allowance for credit loss as of December 31, 2024 and 2023.

Management concluded that the unrealized losses on the available-for-sale fixed maturity securities and short-term investments were due to non-credit related factors and, therefore, there was no allowance for credit loss as of December 31, 2025 and 2024.

The following tables reflect the gross unrealized losses and fair value of short-term investments and available-for-sale fixed maturity securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2025 and 2024:

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Fixed maturities:

Treasury securities and agencies $ 26.4 $ ( 0.3 ) $ 1.8 $ — $ 28.2 $ ( 0.3 )

United States Treasury securities

$ 2.0 $ — $ 0.7 $ — $ 2.7 $ —

Municipal securities — — 6.5 ( 0.1 ) 6.5 ( 0.1 )

2 unchanged sentences

Total fixed maturities $ 43.8 $ ( 0.1 ) $ 20.5 $ ( 0.5 ) $ 64.3 $ ( 0.6 )

Short-term investments 6.4 — — — 6.4 —

Total $ 143.0 $ ( 1.6 ) $ 43.9 $ ( 1.5 ) $ 186.9 $ ( 3.1 )

Less than 12 Months 12 Months or More Total

4 unchanged sentences

Fixed maturities:

Treasury securities and agencies $ 1.7 $ — $ — $ 2.4 $ ( 0.1 ) $ 4.1 $ ( 0.1 )

United States Treasury securities and agencies

$ 26.4 $ ( 0.3 ) $ 1.8 $ — $ 28.2 $ ( 0.3 )

Municipal securities 7.1 ( 0.1 ) 10.4 ( 0.4 ) 17.5 ( 0.5 )

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As of December 31, 2025 and 2024, other investments related to our private equity investments were $ 4.4 million.

There were no realized gains or losses for the years ended December 31, 2024 and 2023.

We recognized $ 1.2 million of realized gains in 2022 related to the sale of one of our private equity investments, which was recorded within net realized gains on investments in our consolidated statements of operations and comprehensive income (loss).

There were no unrealized gains and losses or impairment losses recognized on private equity investments for the years ended December 31, 2024, 2023 and 2022.

The following table reflects the gross and net realized gains and losses on short-term investments, available-for-sale fixed maturities and other investments that have been included in the consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2024, 2023 and 2022:

For the Years Ended December 31,

2024 2023 2022

(dollars in millions)

Realized gains on investments $ — $ — $ 1.2

Realized losses on investments — — ( 0.7 )

Net realized gains on investments $ — $ — $ 0.5

There were no realized or unrealized gains or losses or impairment losses recognized on private equity investments for the years ended December 31, 2025, 2024 and 2023.

There were no realized gains or losses on short-term investments and available-for-sale fixed maturities for the years ended December 31, 2025, 2024 and 2023.

The following table sets forth the amortized cost and fair value of short-term investments and available-for-sale fixed maturity securities by contractual maturity at December 31, 2025:

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$ 14.7 $ 9.6 $ 4.8

Interest on cash and cash equivalents

Interest on cash, cash equivalents, restricted cash, and restricted cash equivalents

25.4 31.9 28.0

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AAA $ 81.5 $ 82.1 21.2 %

AA+, AA, AA-, A-1+

146.0 145.0 47.3

AA+, AA, AA- 171.4 173.3 44.8

A+, A, A- 107.7 108.8 28.1

13 unchanged sentences

As of December 31, 2025 and 2024, these required deposits had an amortized cost of $ 15.7 million and $ 15.8 million, respectively, and fair value of $ 15.9 million and $ 15.6 million, respectively.

We maintain restricted cash equivalents and certain investments in a trust to meet collateral requirements with the fronting carrier.

As of December 31, 2025, we held investments in the trust of $ 77.0 million.

There are withdrawal and other restrictions on these deposits.

Ultimately, when unearned premiums run off and loss reserves are paid under this program, any remaining trust balances will be released and available for general use.

FAIR VALUE OF FINANCIAL INSTRUMENTS

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Fixed maturities:

Treasury securities and agencies $ 46.2 $ — $ — $ 46.2

United States Treasury securities and agencies

$ 46.7 $ 2.5 $ — $ 49.2

Municipal securities — 23.2 — 23.2

2 unchanged sentences

Total fixed maturities 46.7 340.3 — 387.0

Short-term investments 11.8 3.0 — 14.8

Cash equivalents 342.4 — — 342.4

Cash equivalents and restricted cash equivalents 388.0 — — 388.0

Total assets at fair value $ 434.7 $ 340.3 $ — $ 775.0

2 unchanged sentences

Fixed maturities:

Treasury securities and agencies $ 13.3 $ 1.3 $ — $ 14.6

United States Treasury securities and agencies

$ 46.2 $ — $ — $ 46.2

Municipal securities — 23.5 — 23.5

4 unchanged sentences

Cash equivalents

342.4 — — 342.4

Total assets at fair value $ 400.4 $ 248.8 $ — $ 649.2

1 unchanged sentence

All significant inputs were observable in the active markets.

Private Equity Investments Measured at Fair Value on a Non-Recurring Basis

Private equity investments that have been remeasured during the period due to an observable event or impairment are classified within Level 3 in the fair value hierarchy because we estimate the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the investments we hold.

See Note 3, “Investments,” for further information on our private equity investments.

Fair Value of Long-Term Debt

The carrying amount of long-term debt is recorded at the unpaid balance, net of discount and debt issuance costs.

The carrying amount of long-term debt is recorded at the unpaid balance, net of discount and debt issuance costs, and includes interest payable.

The fair value of outstanding long-term debt as of December 31, 2025 was classified within Level 2 of the fair value hierarchy.

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The decrease to incurred losses for prior accident years in 2025 of $ 29.4 million was primarily driven by lower-than-expected reported losses and LAE from accident year 2024 related to liability and physical damage coverages.

The decrease to incurred losses for prior accident years in 2024 of $ 19.4 million was primarily driven by lower-than-expected reported losses and LAE from accident year 2023 related to liability and physical damage coverages.

The decrease to incurred losses for prior accident years in 2023 of $ 7.0 million was primarily driven by lower-than-expected reported losses from accident year 2022 related to liability and physical damage coverages.

The increase to incurred losses for prior accident years in 2022 of $ 2.9 million was primarily driven by higher-than-expected reported losses from accident year 2021 material damage claims due to higher replacement parts cost and growth in used car values.

The following table shows incurred and paid losses and allocated loss adjustment expenses, or ALAE, development by accident year for private passenger auto and renters in aggregate, cumulative claim frequency is defined as the number of reported claims at the claim level which includes reported claims that do not result in a liability:

Incurred Losses and ALAE—Net of Reinsurance

Accident Year 2018 (unaudited) 2019 (unaudited) 2020 (unaudited) 2021

Accident Year 2021

(unaudited) 2022 (unaudited) 2023

(unaudited) 2024

(unaudited) 2025 IBNR Reported Claims (1)

5 unchanged sentences

2025 857.0 232.4 156,609

2023 291.2 276.5 14.8 87,526

2024 667.2 182.9 135,934

Total $ 2,412.5 $ 268.7 659,957

Cumulative Paid Losses and ALAE—Net of Reinsurance

Accident Year 2018 (unaudited) 2019 (unaudited) 2020 (unaudited) 2021

Accident Year 2021

(unaudited) 2022

1 unchanged sentence

(unaudited) 2024

(unaudited) 2025

(dollars in millions)

3 unchanged sentences

2024 387.5 591.1

2022 175.3 248.3 274.7

2023 133.9 245.2

Total 1,989.8

All outstanding liabilities before 2021—net of reinsurance 2.2

Loss and ALAE reserves—net of reinsurance $ 424.9

1 unchanged sentence

(1) Reported by claim event.

The following table sets forth the reconciliation of the claims development tables to the balance sheet losses and ALAE reserves, with separate disclosure of unallocated LAE, or ULAE, and reinsurance recoverable on unpaid losses for the years ended December 31:

(dollars in millions)

7 unchanged sentences

56.1 % 32.6 % 9.2 % 2.7 % 0.7 %

_______________

(1) Supplemental information and unaudited.

The following table reflects amounts affecting the consolidated balance sheets and statements of operations and comprehensive income (loss) for reinsurance as of and for the years ended December 31:

2024 2023 2022

The following table reflects amounts affecting the consolidated balance sheets for reinsurance as of December 31, 2025 and 2024:

(dollars in millions)

1 unchanged sentence

Direct $ 385.7 $ 341.7

71.5 30.8 18.1

Ceded ( 25.4 ) ( 48.0 )

5 unchanged sentences

Net unearned premiums $ 387.4 $ 328.8

The following table reflects amounts affecting the statements of operations and comprehensive income (loss) for reinsurance for the years ended December 31, 2025, 2024 and 2023:

2025 2024 2023

(dollars in millions)

Premiums written:

13 unchanged sentences

Net losses and LAE incurred $ 924.2 $ 733.0 $ 331.3

During 2023, we commuted certain agreements with our reinsurers, which resulted in $ 0.7 million of loss and loss adjustment expenses and a $ 4.6 million expense of other insurance expense (benefit), respectively, on the consolidated statements of operations and comprehensive income (loss).

There were no material commutations during 2025 and 2024.

During 2023, we commuted certain agreements with our reinsurers, which resulted in $ 0.7 million of loss and loss adjustment expenses and a $ 4.6 million expense of other insurance expense, respectively, on the consolidated statements of operations and comprehensive income (loss).

A portion of the loss and loss adjustment expenses is related to an allowance for credit losses of $ 1.7 million that was established due to a commutation with one of our reinsurers as of December 31, 2023.

1 unchanged sentence

Additionally, in connection with the commutation of certain agreements with reinsurers during 2023, we received cash and cash equivalents and released collateral balances held of $ 27.1 million, reinsurance recoverable and receivable decreased by $ 35.1 million, prepaid reinsurance premiums were reduced by $ 34.6 million and reinsurance premiums payable decreased by $ 37.3 million.

There were no commutations during 2024.

If our reinsurance was cancelled at December 31, 2025 and 2024, the maximum amount of return ceded commissions due with the return of unearned premiums would have been $ 0.7 million and $ 4.4 million, respectively.

2 unchanged sentences

LONG-TERM DEBT

In January 2022, we entered into our $ 300.0 million five-year term loan, or Term Loan, with the full principal amount originally due and payable upon maturity on January 27, 2027.

Interest was payable quarterly and determined on a floating interest rate calculated on the Secured Overnight Financing Rate, or SOFR, with a 1.0 % floor, plus 9.0 %.

In January 2022, we entered into a five-year term loan.

As part of the loan agreement, we issued warrants to the lender to purchase approximately 0.3 million shares of our Class A common stock at a strike price of $ 162.00 per share, or Tranche 1 Warrants.

In September 2024, we entered into the first amendment to the term loan, which, among other things, provides greater flexibility for investments in future insurance subsidiaries.

In 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.

In 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.

The resulting principal amount under the Amended Term Loan is $ 200.0 million and has a maturity date of October 29, 2030.

Interest is payable quarterly and is determined on a floating interest rate calculated on SOFR, with a 1.0 % floor, plus an applicable margin ranging from 5.25 % to 6.00 %, based upon the debt-to-capital ratio payable quarterly.

Interest is payable quarterly and is determined on a floating interest rate calculated on Secured Overnight Financing Rate, with a 1.0 % floor, plus an applicable margin ranging from 5.25 % to 6.00 %, based upon the debt-to-capital ratio payable quarterly.

The Amended Term Loan contains debt covenants that require cash and cash equivalents held in entities other than our insurance subsidiaries to be at least $ 50.0 million at all times, direct contribution margin on a rolling twelve months to be at least 20 % at the end of each fiscal quarter and the surplus of our insurance and Cayman subsidiaries to be at least $ 125.0 million at the end of each fiscal quarter.

Additionally, in connection with the Amended Term Loan, a new expiration date was established for the Tranche 1 Warrants of January 26, 2027.

In connection with the Amended Term Loan, during the fourth quarter of 2024, we recognized a loss on extinguishment of debt of $ 5.4 million and we incurred $ 2.4 million of debt discount and issuance costs related to the new borrowings, which were capitalized and will be amortized over the life of the Amended Term Loan.

The Amended Term Loan can be repaid at any time through the maturity date as long as we provide at least three business days written notice and pay a prepayment premium of 2.00 % applicable between October 29, 2024 to October 28, 2025, 1.00 % applicable between October 29, 2025 to October 25, 2026, and no prepayment premium thereafter.

The following summarizes the carrying value of long-term debt and warrants as of December 31, 2024 and 2023:

In connection with the Amended Term Loan, during 2024, we recognized a loss on extinguishment of debt of $ 5.4 million and we incurred $ 2.4 million of debt discount and issuance costs related to the new borrowings, which were capitalized and will be amortized over the life of the Amended Term Loan.

The Amended Term Loan can be repaid at any time through the maturity date as long as we provide at least three business days written notice and pay a prepayment premium of 1.00 % applicable between October 29, 2025 to October 25, 2026, and no prepayment premium thereafter.

The Amended Term Loan is secured by the assets of Root, Inc.

and those of our wholly-owned subsidiary loan parties.

In addition, we have pledged 100 % of the capital stock of our subsidiaries.

The following summarizes the carrying value of long-term debt as of December 31, 2025 and 2024:

(dollars in millions)

2 unchanged sentences

Accrued interest payable

Unamortized discount and debt issuance costs and warrants

Unamortized discount and debt issuance costs

( 3.0 ) ( 3.7 )

Total $ 200.3 $ 200.1

We have operating leases for offices that primarily support our claims and customer service, engineering, and corporate functions.

We have operating leases primarily for office space.

We determine if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether we obtain substantially all of the economic benefits from and have the ability to direct the use of the asset.

17 unchanged sentences

Operating cash flows paid for amounts included in the measurement of lease liabilities $ 2.2 $ 3.0 $ 3.2

We have restricted cash of $ 1.1 million and $ 1.0 million as of December 31, 2025 and 2024, respectively, held by a financial institution to satisfy letter of credit requirements for certain property leases.

We also sublease certain office space, resulting in sublease income.

11 unchanged sentences

Total lease liabilities $ 4.3

The following table displays income tax expense (benefit) for the years ended December 31, 2024, 2023 and 2022:

The following table displays income tax expense for the years ended December 31, 2025, 2024 and 2023:

For the Years Ended December 31,

2 unchanged sentences

Federal $ — $ — $ —

State 0.5 — —

Foreign — — —

Total current 0.5 — —

Federal — — —

Foreign — — —

Total deferred — — —

Total income tax expense (benefit) $ — $ — $ —

The income tax expense (benefit) differed from the amounts computed by applying the statutory U.S.

federal income tax rate of 21 % in 2024, 2023 and 2022 to pretax income as a result of the following:

Total income tax expense

$ 0.5 $ — $ —

2023-09 became effective for the annual reporting period beginning January 1, 2025.

Further details are discussed in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies.”

The income tax expense differed from the amounts computed by applying the statutory United States federal income tax rate of 21 % in 2025 to pretax income, and is presented in accordance with the guidance in ASU 2023-09, as a result of the following:

(dollars in millions)

Income (loss) before income taxes

Statutory U.S.

federal income tax benefit 6.5 21.0 % ( 30.9 ) 21.0 % ( 62.5 ) 21.0 %

Income before income taxes $ 40.8

Statutory United States federal income tax expense $ 8.6 21.0 %

State and local income tax expense, net of federal income tax effect (1)

Foreign tax effects - Cayman Islands

Foreign rate differential ( 21.2 ) ( 52.0 )

Effect of cross-border tax laws

United States tax on foreign insurance income 21.2 52.0

Valuation allowance on deferred tax assets ( 12.6 ) ( 30.9 )

Nontaxable and nondeductible items

Share-based compensation ( 11.8 ) ( 28.9 )

Nondeductible warrant expense 9.3 22.8

Nondeductible compensation 5.8 14.2

Other nondeductible expenses 0.2 0.5

Other adjustments 0.6 1.5

Income tax expense $ 0.5 1.2 %

______________

(1) Florida makes up the majority of the state and local income tax expense, net of federal income tax effect category.

The income tax expense differed from the amounts computed by applying the statutory United States federal income tax rate of 21 % in 2024 and 2023 to pretax income, and is presented in accordance with the guidance that applied prior to the adoption of ASU 2023-09, as a result of the following:

(dollars in millions)

Income (loss) before income taxes $ 30.9 $ ( 147.4 )

Statutory United States federal income tax expense (benefit)

6.5 21.0 % ( 30.9 ) 21.0 %

Valuation allowance on deferred tax assets ( 10.5 ) ( 34.0 ) 34.9 ( 23.7 )

Share-based compensation ( 6.0 ) ( 19.4 ) 5.5 ( 3.7 )

Nondeductible compensation 2.9 9.4 1.2 ( 0.8 )

Return to provision permanent adjustments — — — —

1 unchanged sentence

Other ( 0.8 ) ( 2.6 ) ( 0.2 ) 0.1

Income tax expense (benefit) $ — — % $ — — % $ — — %

Income tax expense

$ — — % $ — — %

The following table sets forth the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024:

8 unchanged sentences

State net operating loss carryforward 28.0 20.0

Net operating loss carryforward 271.6 280.6

Federal net operating loss carryforward

Gross deferred assets 352.6 355.2

23 unchanged sentences

The valuation allowance decreased by $ 6.1 million primarily due to our net operating income for the year ended December 31, 2025.

The following table sets forth carryforwards related to NOLs and tax credits:

The following table sets forth carryforwards related to NOLs and tax credits as of December 31, 2025:

Carryforward with Expiration Carryforward Indefinitely Total Years of Expiration

1 unchanged sentence

Federal $ 629.6 $ 655.1 $ 1,284.7 2038-2046

State (gross, apportioned) 291.2 68.9 360.1 2024 - 2043

State and local (gross, apportioned) 232.1 255.2 487.3 2026-2045

Research and development credits 0.9 — 0.9 2036-2038

1 unchanged sentence

We file a consolidated federal income tax return and certain state income tax returns.

Tax years 2021 and forward are still open to U.S.

federal examinations.

Tax years 2022 and forward are still open to United States federal examinations.

The federal statute of limitations is generally three years.

20 unchanged sentences

The following table displays a rollforward of the accrual for restructuring costs recorded in accounts payable and accrued expenses on the consolidated balance sheets:

Employee costs Other costs Total liability

Employee costs

(dollars in millions)

Restructuring liability as of December 31, 2023

$ 3.1 $ 0.1 $ 3.2

Expense incurred 0.1

2 unchanged sentences

Expense incurred —

Payments ( 8.4 ) — ( 8.4 )

Restructuring liability as of December 31, 2025

2 unchanged sentences

In October 2021, we issued redeemable convertible preferred stock to Carvana pursuant to the Investment Agreement.

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 Preferred Stock, which have a redemption value of $ 126.5 million, and issued Carvana eight tranches of warrants to purchase shares of the Company’s Class A common stock.

Further details on the warrants are discussed in Note 12, “Share-Based Compensation.” In connection with the Investment Agreement, we incurred issuance costs of $ 19.6 million.

We allocated the issuance costs between the preferred stock and the warrants based on their relative fair values.

As of December 31, 2024, issuance costs were recognized in our consolidated balance sheets as follows:

$ 14.5 million as contra-redeemable convertible preferred stock;

and $ 5.1 million as contra-additional paid-in capital.

The carrying value of our preferred stock was $ 112.0 million as of December 31, 2024.

Further details on the warrants are discussed in Note 12, “Share-Based Compensation.” In connection with the Investment Agreement, we incurred issuance costs of $ 19.6 million, which were allocated between the redeemable convertible preferred stock and the warrants based on their relative fair values.

The voting, dividend and liquidation rights of the holders of our Class A and Class B common stock are subject to and qualified by the rights, powers, and preferences of the holders of the preferred stock.

5 unchanged sentences

Holders of preferred stock are entitled to vote, together with the holders of Class A common stock and Class B common stock, on an as-converted basis on all matters submitted to a vote of the holders of Class A common stock and Class B common stock.

Liquidation Preferences —In the event of any voluntary or involuntary liquidation, dissolution, or winding up of our business, after payment or provision for payment of the debts and other liabilities of the Company, the holders of Series A Preferred Stock are entitled to receive, before any distribution out of the assets of the Company may be made to or set aside for the holders of any common stock, an amount per share equal to the greater of (i) $ 9.00 per share plus the amount of any accrued but unpaid dividends thereon as of such date and (ii) the amount such preferred stockholders would have received had they, immediately prior to such an event, converted such shares of Series A

Preferred Stock into Class A common stock.

Thereafter, holders of Class A and Class B common stock are entitled to any remaining proceeds on a pro-rata basis.

Thereafter, holders of Class A and Class B common stock are entitled

to any remaining proceeds on a pro-rata basis.

Class A and Class B common stock are entitled to the same liquidation rights.

3 unchanged sentences

As of December 31, 2025, the conversion price was $ 162.00 per share and the Series A Preferred Stock was convertible into 0.8 million shares of Class A common stock.

To the extent that such conversion would cause the holder to hold in excess of 9.9 % of the voting stock, such conversion would be subject to approval from the Ohio Director of Insurance.

To the extent that such conversion would cause the holder to hold in excess of 9.9 % of the voting stock, such conversion would be subject to approval from state insurance regulatory authorities in Ohio and Florida.

Redemption and Balance Sheet Classification —The redeemable convertible preferred stock is classified as mezzanine equity because while it is not mandatorily redeemable, it will become convertible or redeemable at the option of the preferred stockholder in connection with any change of control of the Company, which is considered not solely within our control.

SHARE-BASED COMPENSATION

As part of the Investment Agreement discussed in Note 11, “Capital Stock,” we issued Carvana eight tranches of warrants, comprised of three tranches of “short-term warrants” and five tranches of “long-term warrants.” However, the exercisability of certain tranches are subject to Carvana’s decision to exercise certain other tranches.

If Carvana exercises short-term tranches, then long-term tranche 1 warrants are cancelled and the remaining long-term tranches would be reduced such that Carvana will have the opportunity to purchase a maximum of 7.2 million shares of Class A common stock.

The short-term and long-term warrants have expiration dates of September 1, 2025 and September 1, 2027, respectively.

The following table provides other key terms of the warrants:

As part of the Investment Agreement discussed in Note 11, “Capital Stock,” we issued Carvana eight tranches of warrants, comprised of three tranches of “short-term warrants” and five tranches of “long-term warrants,” with the opportunity to purchase a maximum of 7.2 million shares of Class A common stock.

The short-term warrants had an expiration date of September 1, 2025 and the long-term warrants have an expiration date of September 1, 2027.

On September 1, 2025, all of the short-term warrants expired unexercised and therefore, no short-term warrants remain outstanding.

All compensation cost associated with the short-term warrants was previously recognized.

For the years ended December 31, 2024 and 2023, we recognized compensation expense of $ 3.8 million and $ 17.4 million, respectively.

There is no expense reversal because the performance obligations had been previously met.

As of December 31, 2025, certain long-term warrant tranches were probable of vesting.

We recognized compensation expense considering the probability of and progress toward achieving the long-term warrant policy origination milestones.

For the year ended December 31, 2025, we recognized compensation expense of $ 19.2 million.

Warrant compensation expense is recorded in other insurance expense in the consolidated statements of operations and comprehensive income (loss).

All of these warrants are out-of-the-money and, therefore, have no intrinsic value as of December 31, 2025.

Based on the probability of achieving certain policy origination milestones, unrecognized compensation cost is approximately $ 7.8 million as of December 31, 2025.

The weighted-average remaining compensation costs are expected to be recognized over a period of 1.75 years.

The following table provides the maximum remaining unrecognized compensation costs as of December 31, 2025, and other key terms of the warrants:

Warrants Exercise Price Shares Issued

(in millions) Grant Date Fair Value per Share Vesting Condition

Tranche 1 $ 180.00 2.4 $ 0.42 Completing the Integrated Platform

Tranche 2 $ 198.00 3.2 $ 0.37 50,000 policy originations

Tranche 3 $ 216.00 1.6 $ 0.18 75,000 policy originations

Total Short-Term 7.2

(in millions) Grant Date Fair Value per Share Unrecognized Compensation Costs

(in millions) Vesting Condition

Tranche 1 $ 180.00 1.4 $ 7.64 $ — 100,000 policy originations

4 unchanged sentences

Total Long-Term 7.2 $ 11.2

As of December 31, 2024, all of the short-term warrants have vested and all of the respective compensation cost has been recognized.

While the short-term warrants are vested and outstanding, it is not a possible outcome for the long-term warrants to also vest, so they are considered not probable of vesting.

If, however, the short-term warrants expire unexercised during 2025, and at that time certain long-term warrants become probable of vesting, we would

recognize a cumulative warrant expense catch-up in other insurance expense (benefit) considering progress toward achieving the long-term warrant policy origination milestones.

We recognized warrant compensation expense related to these equity-classified warrants based on progress toward completing the Integrated Platform and short-term warrant policies originating through the Integrated Platform.

There were no exercises upon vesting and all warrants remain outstanding.

All of these warrants are out-of-the-money and therefore have no intrinsic value as of December 31, 2024.

The following table displays warrant compensation expense recorded in the consolidated statements of operations and comprehensive income (loss):

For the Years Ended December 31,

2024 2023 2022

(dollars in millions)

Warrant compensation expense:

Sales and marketing $ — $ — $ 8.8

Other insurance expense (benefit) 3.8 17.4 5.7

Total warrant compensation expense $ 3.8 $ 17.4 $ 14.5

2020 Equity Incentive Plan

11 unchanged sentences

In 2015, the board of directors of the Company adopted the 2015 Plan under which the Company could grant equity awards (restricted stock, and incentive and nonqualified stock options) to its officers, directors, employees and certain advisors.

In October 2020, this plan was superseded by the 2020 Plan and all reserved shares under the 2015 Plan were transferred to the 2020 Plan.

The following table displays employee share-based compensation expense recorded in the consolidated statements of operations and comprehensive income (loss):

In October 2020, the 2015 Plan was superseded by the 2020 Plan and all reserved shares under the 2015 Plan were transferred to the 2020 Plan.

The following table displays share-based compensation expense recorded in the consolidated statements of operations and comprehensive income (loss):

For the Years Ended December 31,

2 unchanged sentences

Share-based compensation expense:

Net investment income $ 0.2 $ — $ —

Loss and loss adjustment expenses 3.7 1.9 0.7

Sales and marketing 1.0 0.7 0.3

Other insurance expense (benefit) 0.8 0.6 0.8

Other insurance expense 1.3 0.8 0.6

Technology and development 6.6 3.4 3.4

1 unchanged sentence

Total share-based compensation expense $ 40.1 $ 18.5 $ 17.3

As of December 31, 2024, there was $ 0.5 million, $ 19.3 million, $ 1.1 million and $ 17.2 million of unrecognized compensation cost related to unvested stock options, RSUs, MRSUs and PRSUs, respectively.

The remaining costs are expected to be recognized over a period of approximately two years for unvested stock options, three years for RSUs and MRSUs, and four years for PRSUs.

Service-Based Restricted Stock Units

A summary of RSU activity for the years ended December 31, 2024, 2023 and 2022 is as follows:

Service-Based Restricted Stock Units

Number of Shares Weighted-Average

The unrecognized compensation cost and the remaining weighted-average period over which these costs are expected to be recognized for restricted stock units and unvested stock options as of December 31, 2025 is as follows:

Service-based Restricted Stock Units Performance-based Restricted Stock Units Market-based Restricted Stock Units Unvested Stock Options

(dollars in millions)

Unrecognized compensation costs $ 18.9 $ 25.7 $ 0.4 $ 0.1

Remaining weighted-average period cost is expected to be recognized (in years) 1.32 2.50 1.23 0.50

Restricted Stock Units

A summary of restricted stock units activity for the years ended December 31, 2025, 2024 and 2023 is as follows:

For the Years Ended December 31,

Service-based Restricted Stock Units Performance-based Restricted Stock Units Market-based Restricted Stock Units

Restricted Stock Units Number of Shares Weighted-Average

Grant Date Fair

Value per Share Aggregate Intrinsic Value

Value per Share Number of Shares Weighted-Average

Grant Date Fair

Value per Share Number of Shares Weighted-Average

Grant Date Fair

Value per Share

(in millions, except per share amounts)

Nonvested at December 31, 2021

0.5 $ 162.36 $ 27.4

Unvested at December 31, 2022 1.1 $ 51.81 — $ — — $ —

Granted 1.2 6.91 — — 0.4 5.91

1 unchanged sentence

Forfeited, expired or canceled ( 0.2 ) 51.90 — — — —

Nonvested at December 31, 2022

1.1 $ 51.81 $ 5.0

Unvested at December 31 2023 1.5 $ 16.74 — $ — 0.4 $ 5.91

Granted 0.3 50.55 0.2 75.55 — —

1 unchanged sentence

Forfeited, expired or canceled — 22.21 — — — —

Nonvested at December 31, 2023 1.5 $ 16.74 $ 16.2

Unvested at December 31, 2024 1.0 $ 25.89 0.2 $ 75.55 0.4 $ 5.71

Granted 0.2 116.62 0.2 125.91 — —

1 unchanged sentence

Forfeited, expired or canceled ( 0.1 ) 57.16 — — — —

Nonvested at December 31, 2024 1.0 $ 25.89 $ 73.6

Unvested at December 31, 2025 0.6 $ 47.81 0.4 $ 93.78 0.3 $ 5.43

Additional information pertaining to restricted stock units for the years ended December 31, 2025, 2024 and 2023 is as follows:

For the Years Ended December 31,

2025 2024 2023

(dollars in millions)

Service-based restricted stock units:

Total grant date fair value of awards granted $ 20.6 $ 16.9 $ 8.5

Total grant date fair value of awards vested 15.5 14.2 27.3

Total intrinsic value of awards vested 59.3 40.4 3.4

Performance-based restricted stock units:

A summary of PRSU activity for the year ended December 31, 2024 is as follows:

Performance-Based Restricted Stock Units Number of Shares Weighted-Average

Grant Date Fair

Value per Share Aggregate Intrinsic Value

(in millions, except per share amounts)

Nonvested at December 31, 2023 — $ — $ —

Granted 0.2 75.55

Forfeited, expired or canceled — —

Nonvested at December 31, 2024 0.2 $ 75.55 $ 17.6

Total grant date fair value of awards granted $ 17.3 $ 18.3 $ —

Market-based restricted stock units:

The fair value of the MRSUs is estimated on the date of grant using a Monte Carlo simulation with Geometric Brownian Motion that uses certain inputs, assumptions and estimates, as follows:

expected term of approximately five years , based on the contractual term of the MRSUs;

risk-free interest rate of 4.06 %, based on U.S.

Constant Maturity Yield Curve over a similar term;

dividend rate of 0.0 %, based on our historical and expected future dividend payouts;

and volatility of 76 %, and other factors.

A summary of MRSU activity for the years ended December 31, 2024 and 2023 is as follows:

Market-Based Restricted Stock Units Number of Shares Weighted-Average

Grant Date Fair

Value per Share Aggregate Intrinsic Value

(in millions, except per share amounts)

Nonvested at December 31, 2022

Granted 0.4 5.91

Forfeited, expired or canceled — —

Nonvested at December 31, 2023 0.4 $ 5.91 $ 4.1

Vested — 7.69 2.4

Forfeited, expired or canceled — —

Nonvested at December 31, 2024 0.4 $ 5.71 $ 25.5

Total grant date fair value of awards granted $ — $ — $ 2.3

Total grant date fair value of awards vested 0.5 0.3 —

Total intrinsic value of awards vested 10.1 2.4 —

Stock Options

3 unchanged sentences

Outstanding at December 31, 2022 0.2 $ 38.15 5.63 $ 0.2

0.4 $ 42.48 6.12 $ 9.5

Granted — 8.94

2 unchanged sentences

Outstanding at December 31, 2023 0.1 $ 33.68 4.29 $ 0.5

0.2 $ 38.15 5.63 $ 0.2

Granted — 8.94

Exercised — 16.77 0.3

15 unchanged sentences

— $ 137.01 4.17

The 2020 and 2015 Plans permit the optionee to early exercise options to obtain preferred tax treatment before the completion of the award’s requisite service or vesting period.

If the employee terminates employment before the end of this period, the 2020 and 2015 Plans allow us to repurchase the shares, at our option, at the exercise price of the award.

The repurchase feature is used to incentivize the employee to remain through the requisite service or vesting period to receive the full economic benefit of the award.

As of December 31, 2024 and 2023, share repurchase obligations were immaterial to our consolidated financial statements.

COMMITMENTS AND CONTINGENCIES

6 unchanged sentences

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, we do not believe that we are party to any current or pending legal action that if concluded adversely could reasonably be expected to have a material adverse effect on our financial condition or results of operations and cash flow.

On March 19, 2021, a purported class action complaint was filed against the Company and certain of its current and former 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.

The complaint alleged that defendants made false or misleading statements and omissions of purportedly material fact, in violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 thereunder, and of Sections 11 and 15 of the Securities Act in connection with and following the Company’s initial public offering.

The complaint sought unspecified damages.

The defendants’ motion to dismiss the claims set forth in the complaint was granted and the lawsuit was dismissed with prejudice on March 31, 2023, which dismissal was affirmed on April 29, 2024, by the U.S.

Court of Appeals for the Sixth Circuit.

The plaintiffs filed a petition for a writ of certiorari on August 28, 2024 with the U.S.

Supreme Court, which defendants opposed.

The plaintiffs moved to voluntarily dismiss the petition for writ of certiorari and the petition was dismissed on December 6, 2024.

While the outcome of all legal actions is not presently determinable, except as set forth below, we do not believe that we are party to any current or pending legal action that if concluded adversely could reasonably be expected to have a material adverse effect on our financial condition or results of operations and cash flow.

On December 23, 2025, an amended putative collective and class action complaint was filed against the Company, Root, Inc., and its wholly owned subsidiary, Caret Holdings, Inc., in the United States District Court for the Southern District of Ohio, Eastern Division (Case No.

2:25-cv-01078-ALM-KAJ) by a former employee individually and on behalf of other similarly situated current and former employees.

The complaint alleges that the defendants violated the Fair Labor Standards Act and the Missouri Minimum Wage Law by failing to pay non-exempt customer service representatives for all hours worked, including alleged off-the-clock pre-shift and post-shift work and overtime compensation.

The complaint seeks unpaid wages, overtime compensation, liquidated damages, statutory damages, pre- and post-judgment interest, attorneys’ fees, and costs on behalf of the named plaintiff and members of the proposed collective and class.

The Company intends to vigorously defend against the claims.

The lawsuit is in its early stages.

Accordingly, at this time, the Company cannot predict the outcome of this matter or reasonably estimate the likelihood or magnitude of any potential loss contingency.

We are contingently liable for possible future assessments under regulatory requirements for insolvencies and impairments of unaffiliated insurance companies.

OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The following table presents the changes in our accumulated other comprehensive (loss) income, or AOCI, for the years ended December 31, 2024, 2023 and 2022:

For the Years Ended December 31,

2024 2023 2022

(dollars in millions)

Beginning balance $ ( 2.5 ) $ ( 5.8 ) $ 0.4

Other comprehensive income (loss) before reclassifications 0.2 3.3 ( 6.9 )

Net realized gains on investments reclassified from AOCI to net income (loss) — — 0.7

Other comprehensive income (loss) 0.2 3.3 ( 6.2 )

Ending balance $ ( 2.3 ) $ ( 2.5 ) $ ( 5.8 )

EARNINGS (LOSS) PER SHARE

10 unchanged sentences

Redeemable convertible preferred stock 0.8 0.8 —

Service-based restricted stock units 0.5 0.8 —

Market-based restricted stock units 0.3 0.3 —

Stock options 0.1 0.1 —

4 unchanged sentences

Diluted $ 2.36 $ 1.83 $ ( 10.24 )

For the years ended December 31, 2023 and 2022, we operated at a loss and therefore, the conversion of common stock equivalents would increase the denominator of the diluted EPS calculation and create a lower loss per share.

For the year ended December 31, 2023, we operated at a loss and therefore, the conversion of common stock equivalents would increase the denominator of the diluted EPS calculation and create a lower loss per share.

Therefore, these common stock equivalents are considered anti-dilutive and diluted EPS is equal to basic EPS.

5 unchanged sentences

Nonvested shares subject to repurchase

Service-based restricted stock units 0.1 — 1.5

Market-based restricted stock units — — 0.4

Redeemable convertible preferred stock (as converted to common stock)

1 unchanged sentence

STATUTORY FINANCIAL INFORMATION

Root Insurance Company and Root Property & Casualty, or our insurance subsidiaries, are required to prepare statutory financial statements in conformity with the basis of accounting practices prescribed or permitted by the Ohio Department of Insurance.

Ohio has adopted the National Association of Insurance Commissioners, or NAIC, Accounting Practices and Procedures Manual as the basis of their statutory accounting practices.

Root Insurance Company and Root Property & Casualty’s statutory capital and surplus as of December 31, 2024 and 2023 and statutory net income (loss) for the years ended December 31, 2024, 2023 and 2022 are as follows:

Root Insurance Company, Root Property & Casualty and Root Florida, or our insurance subsidiaries, are required to prepare statutory financial statements in conformity with the basis of accounting practices prescribed or

permitted by their respective states of domicile, the Ohio Department of Insurance and the Florida Office of Insurance Regulation, or Florida OIR.

Ohio and Florida have adopted the National Association of Insurance Commissioners, or NAIC, Accounting Practices and Procedures Manual as the basis of their statutory accounting practices.

Root Insurance Company, Root Property & Casualty and Root Florida’s statutory capital and surplus as of December 31, 2025 and 2024 and statutory net income (loss) for the years ended December 31, 2025, 2024 and 2023 are as follows:

Statutory Net Income (Loss)

1 unchanged sentence

2025 2024 2023 2025 2024

(in millions)

(dollars in millions)

Root Insurance Company $ 61.8 $ 37.6 $ ( 44.4 ) $ 57.8 $ 115.7

Root Property & Casualty 37.3 5.9 ( 12.2 ) 143.3 33.3

( 12.1 ) N/A (1)

Total $ 87.0 $ 43.5 $ ( 56.6 ) $ 247.0 $ 149.0

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.

______________

(1) Root Florida was incorporated in 2025.

The payment of dividends by our insurance subsidiaries is subject to restrictions set forth in the insurance laws and regulations of the State of Ohio and the State of Florida.

These insurance laws require domestic insurance companies to notify the supervisory superintendent, commissioner and/or director to seek prior regulatory approval to pay a dividend or distribute cash or other property if the fair market value thereof, together with that of other dividends or distributions made in the preceding twelve months, exceeds the greater of (1) 10% of statutory-basis policyholders' surplus as of the prior December 31 or (2) the statutory-basis net income of the insurer as of the prior December 31.

During the years ended December 31, 2024, 2023 and 2022, Root Insurance Company and Root Property & Casualty did not pay any dividends.

The insurance laws also require domestic insurers to seek prior regulatory approval for any dividend paid from other than earned surplus.

1 unchanged sentence

Additionally, following any dividend, an insurer’s policyholder surplus must be reasonable in relation to the insurer's outstanding liabilities and adequate for its financial needs.

In addition to these limitations, in accordance with our consent order as a new entity, Root Florida is prohibited from paying any dividends for its first three years of operation without prior approval from the Florida OIR.

After this initial three-year period, dividend payments by Root Florida become subject to the standard dividend limitations described above.

After receiving approval from the Ohio Department of Insurance, Root Insurance Company paid extraordinary dividends of $ 123.0 million for the year ended December 31, 2025.

Root Insurance Company did not pay any dividends for the years ended December 31, 2024 and 2023.

Root Property & Casualty and Root Florida did not pay any dividends for the years ended December 31, 2025, 2024 and 2023.

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, 2025, Root Re was subject to compliance with certain capital levels and a net premiums earned to capital ratio up to 15:1, which we maintained as of December 31, 2025.

Root Re must notify CIMA before it can pay any dividend to the holding company.

Root Re paid dividends of $ 60.0 million, zero , and zero to Caret Holdings, Inc.

for the years ended December 31, 2025, 2024 and 2023.

The NAIC Risk-Based Capital, or RBC, model law requires every insurer to calculate its total adjusted capital and RBC requirement to ensure insurer solvency.

1 unchanged sentence

The model includes components for asset risk, underwriting risk, credit risk and other factors.

The State of Ohio imposes a minimum RBC requirement that is developed by the NAIC.

The formulas in the model for determining the amount of RBC specify various weighting factors that are

applied to financial balances or various levels of activity based on the perceived degree of risk.

The State of Ohio and the State of Florida impose a minimum RBC requirement that is developed by the NAIC.

The formulas in the model for determining the amount of RBC specify various weighting

factors that are applied to financial balances or various levels of activity based on the perceived degree of risk.

Regulatory compliance is determined by a ratio of total adjusted capital to authorized control level RBC, as defined by the NAIC.

Companies below specific trigger points or ratios are classified within certain levels, all of which require specified corrective action.

Root Insurance Company and Root Property & Casualty’s capital and surplus exceeded its authorized control level RBC of $ 16.1 million and $ 3.3 million for the year ended December 31, 2024, respectively, and $ 12.8 million and $ 2.8 million for the year ended December 31, 2023, respectively.

Root Insurance Company and Root Property & Casualty’s capital and surplus exceeded its minimum statutory surplus requirements and authorized control level RBC of $ 4.8 million and $ 36.1 million for the year ended December 31, 2025, respectively, and $ 16.1 million and $ 3.3 million for the year ended December 31, 2024, respectively.

Root Florida, incorporated in 2025, reported capital in excess of its minimum statutory surplus requirements and authorized control level RBC of $ 10.5 million for the year ended December 31, 2025.

GEOGRAPHICAL BREAKDOWN OF GROSS PREMIUMS WRITTEN

7 unchanged sentences

128.9 8.6 107.4 8.3 16.9 2.2

California 105.6 7.0 49.2 3.8 10.7 1.4

Pennsylvania 86.8 5.8 74.6 5.7 45.2 5.8

72.8 5.6 53.6 6.8 40.6 6.8

Colorado 76.2 5.1 72.8 5.6 53.6 6.8

South Carolina 53.6 3.6 52.6 4.0 34.4 4.4

50.0 3.8 35.4 4.5 17.1 2.9

49.2 3.8 10.7 1.4 7.7 1.3

36.9 2.8 26.7 3.4 15.1 2.5

33.2 2.6 22.3 2.8 11.8 2.0

Arizona 49.1 3.3 50.0 3.8 35.4 4.5

Nevada 39.9 2.6 23.4 1.8 17.8 2.3

Oklahoma 34.5 2.2 28.9 2.2 23.6 3.0

All others states 460.7 30.5 433.0 33.3 316.9 40.5

9 unchanged sentences

Investments in subsidiaries

Intercompany receivable

Receivable from subsidiaries

$ 615.6 $ 542.4

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity

Long-term debt and warrants

Long-term debt

$ 200.3 $ 200.1

9 unchanged sentences

1,922.0 1,887.9

Accumulated other comprehensive loss

( 2.3 ) ( 2.5 )

Accumulated other comprehensive income (loss)

Accumulated loss ( 1,641.6 ) ( 1,681.9 )

8 unchanged sentences

2025 2024 2023

(in millions)

(dollars in millions)

Net investment income $ 9.0 $ 17.4 $ 21.5

Net realized gains on investments — — 1.2

Total revenue 9.0 17.4 21.5

20 unchanged sentences

Other comprehensive income (loss):

Other comprehensive income (loss) of subsidiaries 0.2 3.3 ( 6.2 )

Other comprehensive income of subsidiaries 6.2 0.2 3.3

Comprehensive income (loss)

6 unchanged sentences

2025 2024 2023

(in millions)

(dollars in millions)

Cash flows from operating activities:

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

$ 42.3 $ ( 43.2 ) $ ( 89.1 )

Cash flows from investing activities:

Sales of investments

Purchases of indefinite-lived intangible assets and transaction costs — — ( 1.3 )

Capitalization of internally developed software ( 14.1 ) ( 11.4 ) ( 9.2 )

2 unchanged sentences

Investment in subsidiaries ( 93.5 ) ( 23.3 ) ( 44.8 )

Net cash used in investing activities ( 10.1 ) ( 54.2 ) ( 369.7 )

Net cash provided by (used in) investing activities

15.4 ( 10.1 ) ( 54.2 )

Cash flows from financing activities:

4 unchanged sentences

Proceeds from issuance of debt and related warrants, net of issuance cost

134.4 — 286.0

Repayments of long-term debt — ( 237.1 ) —

Net cash (used in) provided by financing activities

Net cash used in financing activities

( 25.2 ) ( 120.7 ) ( 4.1 )

Net (decrease) increase in cash, cash equivalents and restricted cash

Net decrease in cash, cash equivalents and restricted cash

32.5 ( 174.0 ) ( 147.4 )

7 unchanged sentences

We are a technology company operating primarily a direct-to-consumer model with the majority of our personal insurance customers acquired through mobile apps.

We offer auto and renters insurance products In August 2019 a new holding company, Root, Inc.

We offer auto and renters insurance products.

In August 2019 a new holding company, Root, Inc.

was formed, which became the parent of Caret Holdings, Inc.

2 unchanged sentences

Basis of Presentation and Combination — The condensed combined financial statements include the accounts of Root, Inc.

and its wholly owned subsidiary, Caret Holdings, Inc., and are prepared in accordance with accounting principles generally accepted in the U.S.

and its wholly owned subsidiary, Caret Holdings, Inc., and are prepared in accordance with accounting principles generally accepted in the United States.

All intercompany accounts and transactions have been eliminated.

2 unchanged sentences

Actual results could differ from those estimates.

Dividends from Subsidiary— Root, Inc.

received dividends and return of capital of $ 123.0 million, zero and zero from Root Insurance Company, dividends and return on capital of $ 60.0 million, zero and zero from Root Reinsurance Company, Ltd.

and dividends and return of capital of zero , $ 25.0 million and zero from Root Insurance Agency, LLC for the years ended December 31, 2025, 2024 and 2023, respectively.

Statement of Cash Flows — The supplemental disclosures for cash and non-cash flows for the years ended December 31, 2025, 2024 and 2023 are as follows:

2025 2024 2023

(in millions)

(dollars in millions)

Supplemental disclosures:

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Federal income taxes paid — — —

Leasehold improvements - non-cash — — 0.9

State income taxes paid

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed combined balance sheets that sum to the total of the same such amount in the condensed combined statements of cash flows:

(in millions)

(dollars in millions)

Cash and cash equivalents $ 262.8 $ 230.4

2 unchanged sentences

$ 263.9 $ 231.4

entered into an agreement with the Superintendent of Insurance, State of Ohio, (the “Superintendent”) guaranteeing that Root Insurance Company will maintain certain capital and surplus requirements or risk-based capital levels, whichever is greater, and such additional surplus as the Superintendent requires.

The guarantee remains in effect until such time as the Superintendent may release Root, Inc.

entered into agreements with the Director of the Ohio Department of Insurance and the Commissioner of the Florida Office of Insurance Regulation (each, a “Regulator”), under which it guarantees that certain of its insurance subsidiaries will maintain the greater of applicable capital and surplus requirements or risk-based capital levels, as well as any additional surplus required by the respective Regulator.

These guarantees remain in effect until the applicable Regulator releases Root, Inc.

from its obligations in writing.

AND SUBSIDIARIES

2 unchanged sentences

of period Charged to costs and expenses Charge to other accounts Deductions Balance at end of period

(in millions)

(dollars in millions)

Year Ended December 31, 2023

12 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data