The latest trading session saw Root, Inc. (ROOT) ending at $51.44, denoting a +0.02% adjustment from its last day's close. The stock's change was more than the S&P 500's daily loss of 0.88%. On the other hand, the Dow registered a gain of 0.56%, and the technology-centric Nasdaq decreased by 2.05%.The company's shares have seen a decrease of 0.66% over the last month, surpassing the Finance sector's loss of 6.2% and the S&P 500's loss of 2.57%.The investment community will be closely monitoring the performa ...

Super Micro Computer (NASDAQ: SMCI) has made headlines this year, as the company came from nowhere to become one of the best-performing companies in Wall Street. It has surged by more than 253% this year, giving it a market cap of over $60 billion. It even entered the S&P 500 index on Monday.Root stock price is surgingCopy link to sectionBut SMCI is trailing another technology company. Root (NASDAQ: ROOT) stock price is up by more than 1,524% in the past 12 months and 467% this year alone. This remarkable s ...

Root, Inc. (NASDAQ:ROOT) Q4 2023 Earnings Conference Call February 21, 2024 5:00 PM ET Company Participants Matt LaMalva - Investor Relations Alex Timm - Co-Founder & Chief Executive Officer Megan Binkley - Chief Financial Officer Conference Call Participants Josh Siegler - Cantor Fitzgerald Yaron Kinar - Jefferies Tommy McJoynt - KBW Elyse Greenspan - Wells Fargo Mike Ward - Citi Operator Good afternoon and welcome to the Root, Inc. Fourth Quarter 2023 Earnings Conference Call. Please note that this call i ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | --- | --- | --- | | Class A common stock, | ROOT | The Nasdaq Stock Market LLC | | $0.0001 par value per share | | | OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ...

Root, Inc. (NASDAQ:ROOT) Q3 2023 Earnings Conference Call November 2, 2023 8:00 AM ET Company Participants Alex Timm - Co-Founder & CEO Megan Binkley - CFO Matt LaMalva - IR Conference Call Participants Josh Siegler - Cantor Fitzgerald Tommy McJoynt - KBW Elyse Greenspan - Wells Fargo Alison Jacobowitz - UBS Operator Good morning. My name is Chris, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Root Inc. Q3 2023 Earnings Conference Call. [Operator Instruction ...

[Part I. Financial Information](index=6&type=section&id=Part%20I.%20Financial%20Information) This section provides Root, Inc.'s unaudited condensed consolidated financial statements and related disclosures [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents Root, Inc.'s unaudited condensed consolidated financial statements, highlighting key financial position and performance Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Summary (Unaudited) | Account | Sep 30, 2023 (in millions) | Dec 31, 2022 (in millions) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $635.3 | $762.1 | | Total investments | $171.5 | $133.2 | | Total assets | $1,240.2 | $1,312.9 | | **Liabilities & Equity** | | | | Loss and loss adjustment expense reserves | $256.5 | $287.4 | | Unearned premiums | $218.9 | $136.5 | | Long-term debt and warrants | $298.3 | $295.4 | | Total liabilities | $951.1 | $923.8 | | Total stockholders' equity | $177.1 | $277.1 | Condensed Consolidated Statements of Operations and Comprehensive Loss Condensed Consolidated Statement of Operations Summary (Unaudited) | Account | Three Months Ended Sep 30, 2023 (in millions) | Three Months Ended Sep 30, 2022 (in millions) | Nine Months Ended Sep 30, 2023 (in millions) | Nine Months Ended Sep 30, 2022 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $115.3 | $73.7 | $260.2 | $239.5 | | Loss and loss adjustment expenses | $85.8 | $80.9 | $208.6 | $273.3 | | Total operating expenses | $149.3 | $130.8 | $349.2 | $454.9 | | Operating loss | $(34.0) | $(57.1) | $(89.0) | $(215.4) | | Net loss | $(45.8) | $(66.4) | $(123.4) | $(239.4) | | Loss per common share | $(3.16) | $(4.71) | $(8.57) | $(17.10) | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statement of Cash Flows Summary (Unaudited) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 (in millions) | Nine Months Ended Sep 30, 2022 (in millions) | | :--- | :--- | :--- | | Net cash used in operating activities | $(79.7) | $(163.9) | | Net cash used in investing activities | $(46.2) | $(5.7) | | Net cash (used in) provided by financing activities | $(0.9) | $283.3 | | **Net (decrease) increase in cash** | **$(126.8)** | **$113.7** | | Cash at beginning of period | $763.1 | $707.0 | | Cash at end of period | $636.3 | $820.7 | Notes to Condensed Consolidated Financial Statements - In Q3 2023, the company commuted certain reinsurance agreements, resulting in the recognition of **$4.4 million** in net premiums earned, **$4.2 million** in loss and LAE, and **$5.8 million** in other insurance expenses[47](index=47&type=chunk) - Restructuring costs related to workforce reductions and other initiatives totaled **$9.4 million** for the nine months ended September 30, 2023, compared to **$8.4 million** in the prior year period[53](index=53&type=chunk) - An additional **$1.7 million** in employee compensation expense is expected through Q4 2023[55](index=55&type=chunk)[56](index=56&type=chunk) - Total share-based compensation expense for the nine months ended September 30, 2023 was **$12.4 million**, a decrease from **$21.8 million** in the same period of 2022[61](index=61&type=chunk) - As of September 30, 2023, there was **$28.7 million** of total unrecognized compensation cost related to unvested equity awards[61](index=61&type=chunk) - The company is party to several legal proceedings, including a class action complaint and a shareholder derivative complaint[67](index=67&type=chunk)[69](index=69&type=chunk) - Management believes the claims are without merit and intends to defend against them vigorously, but cannot predict the outcome or estimate potential loss at this time[70](index=70&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes improved financial performance to strategic actions, rate increases, reduced reinsurance, and expense control Key Performance Indicators Key Performance Indicators Summary | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Policies in force | 259,522 | 255,279 | 259,522 | 255,279 | | Gross premiums written | $224.2M | $150.7M | $503.9M | $478.0M | | Gross profit/(loss) | $11.2M | $(8.3)M | $29.4M | $(28.1)M | | Net loss | $(45.8)M | $(66.4)M | $(123.4)M | $(239.4)M | | Direct contribution | $37.0M | $11.5M | $84.9M | $17.7M | | Adjusted EBITDA | $(19.4)M | $(46.4)M | $(42.6)M | $(161.4)M | | Net combined ratio | 143.1% | 185.1% | 150.1% | 199.3% | | Gross combined ratio | 118.7% | 130.4% | 119.9% | 139.5% | Results of Operations - **Q3 2023 vs Q3 2022:** - **Net Premiums Earned:** Increased **45.8%** to **$100.0 million**, primarily due to reduced reinsurance cessions (**37.4%** in Q3'23 vs **55.8%** in Q3'22) and higher premium per policy from rate actions[127](index=127&type=chunk)[128](index=128&type=chunk) - **Loss and LAE:** Increased **6.1%** to **$85.8 million**, driven by reduced reinsurance cessions, partially offset by better loss experience[132](index=132&type=chunk) - **Gross Accident Period Loss Ratio:** Improved to **68.0%** from **79.3%**, mainly due to rate actions outpacing increased claim severity[133](index=133&type=chunk) - **Operating Expenses:** Total operating expenses increased **14.1%** to **$149.3 million**, driven by higher sales & marketing and other insurance expenses, but offset by decreases in technology and G&A costs[133](index=133&type=chunk) - **Nine Months 2023 vs Nine Months 2022:** - **Net Premiums Earned:** Increased **1.0%** to **$223.9 million**, as reduced reinsurance cessions and rate actions offset a **15.9%** decline in Gross Premiums Earned[139](index=139&type=chunk)[140](index=140&type=chunk) - **Loss and LAE:** Decreased **23.7%** to **$208.6 million** due to better loss experience[143](index=143&type=chunk) - **Gross Accident Period Loss Ratio:** Improved significantly to **67.9%** from **81.3%** due to rate actions[144](index=144&type=chunk) - **Operating Expenses:** Total operating expenses decreased **23.2%** to **$349.2 million**, reflecting broad cost reductions, particularly in Sales & Marketing, Technology, and G&A, following 2022 workforce reductions[144](index=144&type=chunk) Liquidity and Capital Resources - As of September 30, 2023, the company had **$635.3 million** in cash and cash equivalents, with **$502.2 million** held outside of regulated insurance entities, and **$167.1 million** in marketable securities[165](index=165&type=chunk) - The company believes existing cash, marketable securities, and operating cash flow will be sufficient to support working capital and capital expenditure needs for at least the next 12 months[167](index=167&type=chunk) - Net cash used in operating activities improved to **$79.7 million** for the first nine months of 2023, compared to **$163.9 million** for the same period in 2022, primarily due to a lower net loss and reduced operating costs[172](index=172&type=chunk) - The company is subject to debt covenants requiring a minimum of **$200.0 million** in cash and cash equivalents to be held in entities other than its insurance subsidiaries[170](index=170&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk disclosures from the 2022 Annual Report on Form 10-K are reported - There have been no material changes in the quantitative and qualitative market risk disclosures from the 2022 10-K[180](index=180&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were ineffective due to a material weakness in monitoring and control circumvention - As of September 30, 2023, management concluded that disclosure controls and procedures were not effective due to a previously identified material weakness[182](index=182&type=chunk) - The material weakness relates to inadequate senior leadership hiring practices and ineffective controls over vendor management, contracts, and payments, which were circumvented by a former employee[183](index=183&type=chunk) - Remediation efforts are in progress, including enhanced hiring policies and improved vendor management processes, but the new controls have not operated for a sufficient period to demonstrate effectiveness[184](index=184&type=chunk)[185](index=185&type=chunk)[187](index=187&type=chunk) [Part II. Other Information](index=49&type=section&id=Part%20II.%20Other%20Information) This section provides additional information including legal proceedings, risk factors, and equity security disclosures [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, but management does not expect a material adverse financial effect - The company is party to litigation and legal proceedings from time to time[190](index=190&type=chunk) - Except as disclosed in Note 11, management does not believe any pending action will have a material adverse effect on its financials[190](index=190&type=chunk) [Item 1A. Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the 2022 Annual Report on Form 10-K are reported - There have been no material changes in risk factors from those disclosed in the 2022 10-K[192](index=192&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company made no equity security purchases and does not anticipate paying cash dividends due to business needs and restrictions - The company made no purchases of its equity securities during the quarter[194](index=194&type=chunk) - The company has never paid cash dividends and does not anticipate paying any in the foreseeable future, intending to retain earnings for business expansion[195](index=195&type=chunk) - Dividend payments are restricted by state insurance regulations for its subsidiaries and by covenants in its Term Loan agreement[196](index=196&type=chunk)[199](index=199&type=chunk) [Item 3. Defaults Upon Senior Securities](index=52&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable as the company has not defaulted upon any senior securities - Not applicable[200](index=200&type=chunk) [Item 4. Mine Safety Disclosures](index=53&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - Not applicable[202](index=202&type=chunk) [Item 5. Other Information](index=54&type=section&id=Item%205.%20Other%20Information) There is no other information to report for this item - None[204](index=204&type=chunk) [Item 6. Exhibits](index=55&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications - Lists exhibits filed with the report, including CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906[207](index=207&type=chunk)

Financial Data and Key Metrics Changes - The company reported a net loss of $37 million, which is a 62% improvement year-over-year [84] - Adjusted EBITDA improved by 81% over the prior year, resulting in a loss of $12 million [84] - The gross accident period loss ratio decreased to 68%, showing a slight improvement over Q1 [82] Business Line Data and Key Metrics Changes - Gross written premium for Q2 was $145 million, an 8% increase quarter-over-quarter [83] - Gross earned premium for Q2 was $132 million, a slight increase over the first quarter [83] - The company experienced a 65% quarter-over-quarter growth in new writings [76] Market Data and Key Metrics Changes - The company noted that 80% of its footprint is now rate adequate or at single-digit indications [54] - The competitive environment has led to favorable marketing costs, which the company is monitoring closely [78] Company Strategy and Development Direction - The long-term strategy focuses on retaining more business and reducing reinsurance costs [2] - The company aims to leverage technology and machine learning to improve pricing and underwriting [79] - The company is committed to disciplined growth while maintaining profitability [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to achieve profitability with existing capital [80] - The company anticipates elevated cash burn in the second half of the year due to increased acquisition spending [87] - Management is optimistic about the growth potential from partnerships, particularly with Carvana [20] Other Important Information - The company ended Q2 with $520 million of unencumbered cash, a minimal change from $524 million at the end of Q1 [85] - The company has been decreasing its external session percentage as business improves [66] Q&A Session Summary Question: What is driving the elevated cash burn in the second half of the year? - Management clarified that the cash burn is a result of increased marketing and acquisition spending, but emphasized that growth is not at the expense of profit [24][26] Question: Can you discuss the new pricing model and its impact on loss ratios? - Management highlighted that the new pricing model is 17% more accurate and is expected to improve loss ratios moving forward [12][15] Question: What is the status of the Carvana partnership? - Management reported strong growth in the Carvana partnership, with customer adoption tripling [19][20] Question: How much of the states are now rate adequate? - Management indicated that 80% of their footprint is now rate adequate or at single-digit indications [54] Question: What are the future pricing assumptions around frequency? - Management noted that they are targeting high single digits for overall trends, considering both frequency and severity [56]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from____________to____________ Commission File Number: 001-39658 ROOT, INC. (Exact name of Registrant as specified in its charter) Delaware 84-2717903 (State or oth ...

Root, Inc. (NASDAQ:ROOT) Q1 2023 Results Conference Call May 4, 2023 8:00 AM ET Company Participants Jodi Baker - Investor Relations Alex Timm - Co-Founder and Chief Executive Officer Megan Binkley - Interim Chief Financial Officer Frank Palmer - Chief Insurance Officer Conference Call Participants Josh Siegler - Cantor Fitzgerald Tommy McJoynt - KBW Peter Phipson - Evercore Charlie Lederer - Citi Operator Thank you for standing by, my name is Kayla Baker, and I will be your conference operator today. At th ...

[Special Note Regarding Forward-Looking Statements](index=3&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section cautions readers about forward-looking statements concerning future performance and market conditions, noting inherent risks and uncertainties - The report contains forward-looking statements regarding **future financial performance**, **customer acquisition and retention**, **profitability**, **capital runway**, and **market competition**[10](index=10&type=chunk) - Readers should not rely on forward-looking statements as predictions of future events due to **inherent risks**, **uncertainties**, and a **rapidly changing environment**[11](index=11&type=chunk) [Part I. Financial Information](index=5&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents Root, Inc.'s unaudited condensed consolidated financial statements, detailing financial position, performance, and cash movements [Condensed Consolidated Balance Sheets - Unaudited](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20-%20Unaudited) As of March 31, 2023, Root, Inc. reported decreases in total assets, liabilities, and stockholders' equity, driven by reduced cash and reinsurance recoverable | Metric | March 31, 2023 (in millions) | December 31, 2022 (in millions) | Change (in millions) | % Change | | :----------------------------------- | :----------------------------- | :------------------------------ | :------------------- | :--------- | | Total assets | $1,201.1 | $1,312.9 | $(111.8) | (8.5)% | | Total liabilities | $845.4 | $923.8 | $(78.4) | (8.5)% | | Loss and loss adjustment expense reserves | $259.6 | $287.4 | $(27.8) | (9.7)% | | Unearned premiums | $141.1 | $136.5 | $4.6 | 3.4% | | Long-term debt and warrants | $296.3 | $295.4 | $0.9 | 0.3% | | Cash and cash equivalents | $679.3 | $762.1 | $(82.8) | (10.9)% | | Total stockholders' equity | $243.7 | $277.1 | $(33.4) | (12.1)% | [Condensed Consolidated Statements of Operations and Comprehensive Loss - Unaudited](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20-%20Unaudited) For Q1 2023, Root, Inc. significantly reduced net and comprehensive loss, driven by decreased operating expenses, despite lower total revenues | Metric | Three Months Ended March 31, 2023 (in millions) | Three Months Ended March 31, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------- | :--------- | | Total revenues | $70.1 | $85.4 | $(15.3) | (17.9)% | | Net premiums earned | $60.0 | $78.3 | $(18.3) | (23.4)% | | Net investment income | $6.7 | $0.6 | $6.1 | 1,016.7% | | Total operating expenses | $99.9 | $157.4 | $(57.5) | (36.5)% | | Loss and loss adjustment expenses | $63.3 | $96.7 | $(33.4) | (34.5)% | | Sales and marketing | $3.6 | $15.3 | $(11.7) | (76.5)% | | Net loss | $(40.9) | $(77.5) | $36.6 | (47.2)% | | Comprehensive loss | $(39.8) | $(81.2) | $41.4 | (51.0)% | | Loss per common share (basic and diluted) | $(2.88) | $(5.54) | $2.66 | (48.0)% | [Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity - Unaudited](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Redeemable%20Convertible%20Preferred%20Stock%20and%20Stockholders%27%20Equity%20-%20Unaudited) As of March 31, 2023, total stockholders' equity decreased to **$243.7 million** from **$277.1 million**, mainly due to a **net loss of $40.9 million** | Metric | January 1, 2023 (in millions) | March 31, 2023 (in millions) | Change (in millions) | | :------------------------------------ | :---------------------------- | :--------------------------- | :------------------- | | Total Stockholders' Equity | $277.1 | $243.7 | $(33.4) | | Net loss | N/A | $(40.9) | $(40.9) | | Other comprehensive gain | N/A | $1.1 | $1.1 | | Common stock—share-based compensation expense | N/A | $2.5 | $2.5 | | Warrant compensation expense | N/A | $4.4 | $4.4 | [Condensed Consolidated Statements of Cash Flows - Unaudited](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20-%20Unaudited) For Q1 2023, Root, Inc. experienced a **net decrease of $82.8 million** in cash, primarily due to increased cash used in operating activities | Metric | Three Months Ended March 31, 2023 (in millions) | Three Months Ended March 31, 2022 (in millions) | Change (in millions) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------- | | Net cash used in operating activities | $(83.7) | $(51.2) | $(32.5) | | Net cash provided by (used in) investing activities | $0.9 | $(6.3) | $7.2 | | Net cash provided by financing activities | $0.0 | $286.2 | $(286.2) | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(82.8) | $228.7 | $(311.5) | | Cash, cash equivalents and restricted cash at end of period | $680.3 | $935.7 | $(255.4) | [Notes to Condensed Consolidated Financial Statements - Unaudited](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20-%20Unaudited) This section provides detailed disclosures for the condensed consolidated financial statements, covering business nature, accounting policies, investments, and key financial areas [Note 1. Nature of Business](index=9&type=section&id=1.%20NATURE%20OF%20BUSINESS) Root, Inc. is a technology-driven holding company operating a direct-to-consumer model for personal auto and renters insurance via mobile apps and an embedded platform - Root, Inc. is a technology company operating a **direct-to-consumer model**, primarily acquiring customers through **mobile applications** and an **embedded platform**[27](index=27&type=chunk) - The company offers **auto and renters insurance products** underwritten by its subsidiaries, Root Insurance Company and Root Property & Casualty Insurance Company[27](index=27&type=chunk) [Note 2. Basis of Presentation and Summary of Significant Accounting Policies](index=9&type=section&id=2.%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the basis for preparing unaudited consolidated financial statements, highlighting significant estimates and a revision of 2022 statements due to immaterial errors - The condensed consolidated financial statements are **unaudited**, prepared in accordance with **GAAP**, and include all **wholly-owned subsidiaries**[28](index=28&type=chunk)[29](index=29&type=chunk) - Management makes significant estimates, including **reserves for loss and LAE**, **allowance for expected credit losses on premium receivables**, and **valuation allowances for income taxes**[30](index=30&type=chunk) - Errors in 2022 quarterly financial statements related to **misappropriation of funds** by a senior marketing employee were identified and revised, but deemed **immaterial** to the interim statements[31](index=31&type=chunk)[32](index=32&type=chunk) - A **1-for-18 reverse stock split** of Class A and Class B common stock was approved in August 2022, retroactively adjusted in all historical per share data[35](index=35&type=chunk) [Note 3. Investments](index=12&type=section&id=3.%20INVESTMENTS) As of March 31, 2023, total investments decreased to **$130.9 million**, primarily in fixed maturities, with net investment income significantly increasing to **$6.7 million** for Q1 2023 | Metric | March 31, 2023 (in millions) | December 31, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------------ | :----------------------------- | :------------------------------ | :------------------- | :--------- | | Total investments | $130.9 | $133.2 | $(2.3) | (1.7)% | | Fixed maturities available-for-sale, at fair value | $126.4 | $128.4 | $(2.0) | (1.6)% | | Short-term investments | $0.1 | $0.4 | $(0.3) | (75.0)% | | Other investments | $4.4 | $4.4 | $0.0 | 0.0% | | Metric | Three Months Ended March 31, 2023 (in millions) | Three Months Ended March 31, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------- | :--------- | | Net investment income | $6.7 | $0.6 | $6.1 | 1,016.7% | | Interest on deposits and cash equivalents | $5.9 | $0.2 | $5.7 | 2,850.0% | - Management concluded that **unrealized losses on available-for-sale securities** were due to **non-credit related factors**, with no allowance for credit loss recognized[38](index=38&type=chunk) - The majority of fixed maturities are rated **AAA (45.5% as of March 31, 2023)**, indicating high credit quality[43](index=43&type=chunk) [Note 4. Fair Value of Financial Instruments](index=16&type=section&id=4.%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) As of March 31, 2023, total assets at fair value were **$590.8 million**, primarily cash equivalents and fixed maturities, with long-term debt's fair value estimated at **$309.8 million** | Asset Category | March 31, 2023 (in millions) | December 31, 2022 (in millions) | | :------------------------------------ | :----------------------------- | :------------------------------ | | Total assets at fair value | $590.8 | $616.1 | | Cash equivalents (Level 1) | $464.3 | $487.3 | | Total fixed maturities (Level 2) | $119.1 | $119.2 | | Metric | March 31, 2023 (in millions) | December 31, 2022 (in millions) | | :------------------------------------ | :----------------------------- | :------------------------------ | | Long-term debt (carrying amount) | $296.3 | $295.4 | | Long-term debt (estimated fair value) | $309.8 | $309.7 | [Note 5. Loss and Loss Adjustment Expense Reserves](index=17&type=section&id=5.%20LOSS%20AND%20LOSS%20ADJUSTMENT%20EXPENSE%20RESERVES) Net loss and LAE reserves decreased to **$185.9 million** as of March 31, 2023, with prior accident year incurred losses increasing by **$1.4 million** due to higher vehicle repair costs | Metric | January 1, 2023 (in millions) | March 31, 2023 (in millions) | Change (in millions) | | :------------------------------------ | :---------------------------- | :--------------------------- | :------------------- | | Net loss and LAE reserves | $211.0 | $185.9 | $(25.1) | | Gross loss and LAE reserves | $287.4 | $259.6 | $(27.8) | - Incurred losses and LAE related to prior accident years increased by **$1.4 million** for Q1 2023, driven by higher vehicle repair costs and LAE on material damage claims[49](index=49&type=chunk) [Note 6. Reinsurance](index=18&type=section&id=6.%20REINSURANCE) For Q1 2023, gross premiums written decreased by **28.0%** to **$134.7 million**, and net premiums earned decreased by **23.4%** to **$60.0 million**, with **53.9%** of gross premiums ceded | Metric | Three Months Ended March 31, 2023 (in millions) | Three Months Ended March 31, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------- | :--------- | | Gross premiums written | $134.7 | $187.2 | $(52.5) | (28.0)% | | Ceded premiums written | $(69.9) | $(102.4) | $32.5 | (31.7)% | | Net premiums written | $64.8 | $84.8 | $(20.0) | (23.6)% | | Gross premiums earned | $130.1 | $174.7 | $(44.6) | (25.5)% | | Ceded premiums earned | $(70.1) | $(96.4) | $26.3 | (27.3)% | | Net premiums earned | $60.0 | $78.3 | $(18.3) | (23.4)% | | Net losses and LAE incurred | $63.3 | $96.7 | $(33.4) | (34.5)% | - The company ceded **53.9% of gross premiums earned** in Q1 2023, a slight decrease from **55.2%** in Q1 2022, indicating a slightly larger retention of its book of business[128](index=128&type=chunk) [Note 7. Long-Term Debt](index=18&type=section&id=7.%20LONG-TERM%20DEBT) As of March 31, 2023, long-term debt was **$296.3 million**, primarily a **$300.0 million** five-year term loan with quarterly floating-rate interest | Metric | March 31, 2023 (in millions) | December 31, 2022 (in millions) | | :------------------------------------ | :----------------------------- | :------------------------------ | | Term Loan | $300.0 | $300.0 | | Accrued interest payable | $7.4 | $7.3 | | Unamortized discount, debt issuance costs and warrants | $(11.1) | $(11.9) | | Total Long-Term Debt | $296.3 | $295.4 | - The company has a **$300.0 million five-year term loan**, maturing on January 27, 2027, with interest calculated on **SOFR plus 9.0% and 0.26161% per annum**[51](index=51&type=chunk) [Note 8. Income Taxes](index=18&type=section&id=8.%20INCOME%20TAXES) The effective tax rate for Q1 2023 and 2022 was **zero** due to a full valuation allowance on U.S. deferred tax assets, with no unrecognized tax benefits - The effective tax rate was **zero** for Q1 2023 and Q1 2022 due to a **full valuation allowance on U.S. deferred tax assets**[52](index=52&type=chunk) - No unrecognized tax benefits for uncertain tax positions or related interest/penalties were reported as of March 31, 2023, and December 31, 2022[52](index=52&type=chunk) [Note 9. Restructuring Costs](index=19&type=section&id=9.%20RESTRUCTURING%20COSTS) In Q1 2023, Root, Inc. incurred **$5.6 million** in restructuring costs, down from **$7.8 million** in Q1 2022, as part of strategic initiatives to reduce operating costs | Restructuring Costs | Three Months Ended March 31, 2023 (in millions) | Three Months Ended March 31, 2022 (in millions) | Cumulative Incurred Through March 31, 2023 (in millions) | | :------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------------------- | | Employee costs | $2.3 | $5.6 | $17.8 | | Real estate exit costs | $0.0 | $1.5 | $2.1 | | Other costs | $3.3 | $0.7 | $4.3 | | Total restructuring costs | $5.6 | $7.8 | $24.2 | - The company expects to incur approximately **$5.5 million in additional employee compensation expense** related to restructuring through Q4 2023, with a cash expenditure in January 2024[55](index=55&type=chunk) [Note 10. Share-Based Compensation](index=20&type=section&id=10.%20SHARE-BASED%20COMPENSATION) Total share-based compensation expense decreased to **$2.5 million** for Q1 2023, while warrant compensation expense was **$4.4 million**, recognized in other insurance expense | Expense Type | Three Months Ended March 31, 2023 (in millions) | Three Months Ended March 31, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------- | :--------- | | Total share-based compensation expense | $2.5 | $6.6 | $(4.1) | (62.1)% | | Restricted stock unit expense | $2.1 | $6.1 | $(4.0) | (65.6)% | | Stock option expense | $0.4 | $0.5 | $(0.1) | (20.0)% | | Warrant Compensation Expense | Three Months Ended March 31, 2023 (in millions) | Three Months Ended March 31, 2022 (in millions) | Change (in millions) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------- | | Sales and marketing | $0.0 | $5.3 | $(5.3) | | Other insurance expense | $4.4 | $0.0 | $4.4 | | Total warrant compensation expense | $4.4 | $5.3 | $(0.9) | - As of March 31, 2023, **$16.7 million of unrecognized compensation cost** related to warrants is expected to be recognized over approximately two years[58](index=58&type=chunk) - Unrecognized compensation cost for unvested stock options and RSUs totaled **$1.7 million** and **$26.9 million**, respectively, expected to be recognized over three to four years[61](index=61&type=chunk) [Note 11. Commitments and Contingencies](index=22&type=section&id=11.%20COMMITMENTS%20AND%20CONTINGENCIES) The company faces various legal proceedings, including class action lawsuits regarding vehicle total loss claims and an IPO-related shareholder derivative complaint, which it intends to defend vigorously - Root Insurance Company faces a class action in Louisiana for alleged **breach of contract** and **violation of state law** in settling vehicle total loss claims[65](index=65&type=chunk) - Another class action in Texas alleges failure to include **sales tax in total loss vehicle settlements**, violating the Texas Prompt Payment of Claims Act[66](index=66&type=chunk) - A shareholder derivative complaint and a class action lawsuit allege **false or misleading statements and omissions** related to the company's IPO[67](index=67&type=chunk)[68](index=68&type=chunk) - The company believes these claims are **without merit** and intends to defend them vigorously, but cannot predict the outcome or estimate the magnitude of potential loss contingencies[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) [Note 12. Loss Per Share](index=23&type=section&id=12.%20LOSS%20PER%20SHARE) For Q1 2023, basic and diluted loss per common share was **$(2.88)**, a significant improvement from **$(5.54)** in Q1 2022, with **9.6 million** anti-dilutive equivalents excluded | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | % Change | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :------- | :--------- | | Net loss (in millions) | $(40.9) | $(77.5) | $36.6 | (47.2)% | | Weighted-average common shares outstanding (in millions) | 14.2 | 14.0 | 0.2 | 1.4% | | Loss per common share: basic and diluted | $(2.88) | $(5.54) | $2.66 | (48.0)% | - Potentially dilutive common stock equivalents (options, nonvested shares, RSUs, preferred stock, warrants) totaling **9.6 million** as of March 31, 2023, were excluded from diluted EPS calculation due to their **anti-dilutive effect**[70](index=70&type=chunk) [Note 13. Geographical Breakdown of Gross Premiums Written](index=24&type=section&id=13.%20GEOGRAPHICAL%20BREAKDOWN%20OF%20GROSS%20PREMIUMS%20WRITTEN) For Q1 2023, total gross premiums written decreased to **$134.7 million**, with Texas remaining the largest market at **14.5%**, followed by Georgia and Colorado | State | Three Months Ended March 31, 2023 (Amount in millions) | % of Total (2023) | Three Months Ended March 31, 2022 (Amount in millions) | % of Total (2022) | | :---------------- | :--------------------------------------------- | :---------------- | :--------------------------------------------- | :---------------- | | Texas | $19.5 | 14.5% | $37.3 | 19.9% | | Georgia | $13.9 | 10.3% | $18.8 | 10.0% | | Colorado | $10.6 | 7.9% | $10.7 | 5.7% | | Pennsylvania | $9.3 | 6.9% | $10.0 | 5.3% | | Utah | $7.2 | 5.3% | $9.0 | 4.8% | | South Carolina | $6.2 | 4.6% | $7.1 | 3.8% | | Louisiana | $5.5 | 4.1% | $10.7 | 5.7% | | Arizona | $4.7 | 3.5% | $5.3 | 2.8% | | Oklahoma | $4.7 | 3.5% | $6.3 | 3.4% | | Nevada | $4.4 | 3.3% | $8.7 | 4.6% | | All others states | $48.7 | 36.1% | $63.3 | 34.0% | | Total | $134.7 | 100.0% | $187.2 | 100.0% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition and operational results, highlighting the tech-enabled insurance model, KPIs, and liquidity [Our Business](index=25&type=section&id=Our%20Business) Root is a tech-enabled insurance company revolutionizing personal insurance through a direct-to-consumer and embedded platform model, leveraging telematics for efficient risk segmentation - Root is a **tech-enabled insurance company** revolutionizing personal insurance with a pricing model based on fairness and a modern customer experience, primarily **direct-to-consumer** via mobile apps and an embedded platform[74](index=74&type=chunk) - The company's advantage stems from its ability to efficiently bind auto insurance policies by segmenting individual risk using **complex behavioral data** and **proprietary telematics**[75](index=75&type=chunk) - As the business scales and matures, Root expects **improved loss ratios**, **reduced marketing as a percentage of premium**, and **increased revenue per customer**[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk) - Root employs a "**capital-efficient**" model utilizing high levels of reinsurance to support top-line growth, customer acquisition costs, and protection from outsized losses[81](index=81&type=chunk) [Recent Developments Affecting Comparability](index=26&type=section&id=Recent%20Developments%20Affecting%20Comparability) Macroeconomic factors like inflation, supply chain disruptions, and rising interest rates have increased claims severity and cost of capital, while the COVID-19 pandemic continues to pose uncertainties - Economic instability, inflation, and supply chain disruptions have led to **increased claims severity** due to higher used vehicle and replacement part values[84](index=84&type=chunk) - Rising interest rates and reduced equity values have **increased the cost of capital** and may limit the company's ability to raise additional capital[84](index=84&type=chunk) - The COVID-19 pandemic continues to create uncertainty regarding its severity, duration, and potential impact on the company's business and financial performance[86](index=86&type=chunk) [Comprehensive Reinsurance](index=27&type=section&id=Comprehensive%20Reinsurance) Root plans to continue using diversified reinsurance to strategically fuel growth and technology investment by optimizing capital requirements and responding to market changes - The company expects to continue using reinsurance to strategically fuel **growth and technology investment** by optimizing capital requirements[87](index=87&type=chunk) - A diversified reinsurance approach provides flexibility to respond to changes in **market conditions** or **business needs**[87](index=87&type=chunk) [Key Performance Indicators](index=27&type=section&id=Key%20Performance%20Indicators) Root uses various KPIs, including policies in force, premiums, gross profit, net loss, and ratios, to evaluate performance; Q1 2023 saw decreased policies but improved net loss and Adjusted EBITDA | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | % Change | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :------- | :--------- | | Policies in force | 199,685 | 335,273 | (135,588) | (40.4)% | | Premiums per policy | $1,292 | $1,040 | $252 | 24.2% | | Premiums in force (in millions) | $516.0 | $697.4 | $(181.4) | (26.0)% | | Gross premiums written (in millions) | $134.7 | $187.2 | $(52.5) | (28.0)% | | Gross premiums earned (in millions) | $130.1 | $174.7 | $(44.6) | (25.5)% | | Gross profit/(loss) (in millions) | $5.5 | $(12.3) | $17.8 | 144.7% | | Net loss (in millions) | $(40.9) | $(77.5) | $36.6 | (47.2)% | | Direct contribution (in millions) | $18.6 | $6.4 | $12.2 | 190.6% | | Adjusted EBITDA (in millions) | $(11.3) | $(51.8) | $40.5 | (78.2)% | | Net loss and LAE ratio | 105.5% | 123.5% | (18.0) pp | (14.6)% | | Net expense ratio | 55.7% | 71.3% | (15.6) pp | (21.9)% | | Net combined ratio | 161.2% | 194.8% | (33.6) pp | (17.2)% | | Gross loss ratio | 71.5% | 84.1% | (12.6) pp | (15.0)% | | Gross LAE ratio | 11.2% | 9.1% | 2.1 pp | 23.1% | | Gross expense ratio | 40.3% | 42.4% | (2.1) pp | (5.0)% | | Gross combined ratio | 123.0% | 135.6% | (12.6) pp | (9.3)% | | Gross accident period loss ratio | 69.3% | 81.5% | (12.2) pp | (15.0)% | - **Policies in force decreased by 40.4% YoY**, while **premiums per policy increased by 24.2% YoY**, indicating a focus on higher-value policies[89](index=89&type=chunk) - **Gross profit/(loss) improved significantly** from a loss of **$12.3 million** to a profit of **$5.5 million**, and **Adjusted EBITDA improved** from a loss of **$51.8 million** to a loss of **$11.3 million**[89](index=89&type=chunk) [Components of Our Results of Operations](index=30&type=section&id=Components%20of%20Our%20Results%20of%20Operations) This section details Root's revenue streams and operating expenses, including net premiums, investment income, loss and LAE, and sales/marketing, anticipating short-term premium decreases but long-term growth - Revenue sources include **net premiums earned**, **net investment income**, **net realized gains on investments**, **fee income**, and **other income**[109](index=109&type=chunk) - Operating expenses comprise **loss and LAE**, **sales and marketing**, **other insurance expense**, **technology and development**, and **general and administrative expenses**[115](index=115&type=chunk) - Net premiums earned are expected to decrease in the short term due to lower policies in force, but growth is anticipated from **embedded products** and **greater premiums per policy**[110](index=110&type=chunk) - Sales and marketing expenses are expected to decrease as a percentage of revenue in the long term as the proportion of renewals increases[120](index=120&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) For Q1 2023, Root reported a **net loss of $40.9 million**, a **47.2%** improvement, driven by a **36.5%** reduction in operating expenses, despite a **17.9%** revenue decrease | Metric | Three Months Ended March 31, 2023 (in millions) | Three Months Ended March 31, 2022 (in millions) | $ Change | % Change | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------- | :--------- | | Total revenues | $70.1 | $85.4 | $(15.3) | (17.9)% | | Net premiums earned | $60.0 | $78.3 | $(18.3) | (23.4)% | | Net investment income | $6.7 | $0.6 | $6.1 | 1,016.7% | | Total operating expenses | $99.9 | $157.4 | $(57.5) | (36.5)% | | Loss and loss adjustment expenses | $63.3 | $96.7 | $(33.4) | (34.5)% | | Sales and marketing | $3.6 | $15.3 | $(11.7) | (76.5)% | | Technology and development | $10.2 | $13.9 | $(3.7) | (26.6)% | | General and administrative | $21.5 | $30.5 | $(9.0) | (29.5)% | | Net loss | $(40.9) | $(77.5) | $36.6 | (47.2)% | | Interest expense | $(11.1) | $(5.5) | $(5.6) | 101.8% | - The decrease in net premiums earned was primarily due to **lower policies in force**, partially offset by a **24.2% increase in premium per policy** from rate actions[127](index=127&type=chunk)[129](index=129&type=chunk) - Loss and LAE decreased by **34.5%** due to lower policies in force and better loss experience, with **gross accident period loss ratios improving from 81.5% to 69.3%**[131](index=131&type=chunk)[132](index=132&type=chunk) - Sales and marketing expenses decreased by **76.5%**, largely due to a **$5.3 million decline in warrant compensation expense** and reduced content development costs[133](index=133&type=chunk) [Non-GAAP Financial Measures](index=35&type=section&id=Non-GAAP%20Financial%20Measures) This section reconciles non-GAAP measures, Direct Contribution and Adjusted EBITDA, used for performance evaluation; Direct Contribution increased to **$18.6 million**, and Adjusted EBITDA improved to a **$11.3 million** loss | Metric | Three Months Ended March 31, 2023 (in millions) | Three Months Ended March 31, 2022 (in millions) | Change (in millions) | % Change | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------- | :--------- | | Direct contribution | $18.6 | $6.4 | $12.2 | 190.6% | | Adjusted EBITDA | $(11.3) | $(51.8) | $40.5 | (78.2)% | - Management uses **Direct Contribution** and **Adjusted EBITDA** as integral parts of managing the business, providing useful insight into results of operations and underlying business performance, despite not being GAAP measures[141](index=141&type=chunk)[142](index=142&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Root's liquidity is financed through policy sales, stock/debt issuance, and investment sales; as of March 31, 2023, it had **$679.3 million** in cash, with sufficient resources despite regulatory and debt restrictions - As of March 31, 2023, Root had **$679.3 million in cash and cash equivalents**, with **$523.6 million** held outside regulated insurance entities, and **$126.5 million in marketable securities**[155](index=155&type=chunk)[156](index=156&type=chunk) - The company believes existing cash, equivalents, marketable securities, and cash flow from operations are sufficient for short-term and foreseeable future capital requirements[157](index=157&type=chunk) - Insurance subsidiaries are subject to **regulatory restrictions on dividends**, and the Term Loan includes covenants requiring at least **$200.0 million in unrestricted cash** and restricting dividend payments[151](index=151&type=chunk)[159](index=159&type=chunk)[187](index=187&type=chunk) - The company's insurance subsidiaries maintained **risk-based capital levels in excess of corrective action requirements** as of March 31, 2023[152](index=152&type=chunk) [Material Cash Requirements from Contractual and Other Obligations](index=39&type=section&id=Material%20Cash%20Requirements%20from%20Contractual%20and%20Other%20Obligations) No material changes to contractual and other obligations since the 2022 10-K, and the company believes it has sufficient resources and access to capital to meet its obligations - No material changes to contractual and other obligations since the 2022 10-K[164](index=164&type=chunk) - The company believes it has sufficient resources and access to additional debt and equity capital to meet its obligations[164](index=164&type=chunk) [Off-Balance Sheet Arrangements](index=39&type=section&id=Off-Balance%20Sheet%20Arrangements) The company has no off-balance sheet arrangements with a material current or future effect on its financial condition, results of operations, liquidity, or cash flows - The company has no off-balance sheet arrangements with a material current or future effect on its financial condition, results of operations, liquidity, or cash flows[165](index=165&type=chunk) [Critical Accounting Estimates](index=39&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates include reserves for loss and LAE, premium write-offs, and deferred tax asset valuation allowance, with no material changes in Q1 2023 compared to the 2022 10-K - Critical accounting estimates include **reserves for loss and LAE**, **premium write-offs**, and **valuation allowance on deferred tax assets**[166](index=166&type=chunk) - No material changes to critical accounting estimates occurred during the three months ended March 31, 2023, compared to the 2022 10-K[167](index=167&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to the company's quantitative and qualitative market risk disclosures have occurred since the 2022 10-K - No material changes in market risk disclosures from the 2022 10-K[168](index=168&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) As of March 31, 2023, disclosure controls were ineffective due to a material weakness in internal control over financial reporting, stemming from inadequate hiring and vendor management, with remediation efforts underway - Disclosure controls and procedures were **not effective** as of March 31, 2023, due to a **material weakness in internal control over financial reporting**[170](index=170&type=chunk) - The material weakness was related to **inadequate hiring practices** for senior leadership and **ineffective control/monitoring activities** for third-party vendors, contributing to fraud by a former senior marketing employee[171](index=171&type=chunk) - Remediation efforts include **enhanced hiring practices**, **improved vendor management processes**, **clarified vendor payment controls**, and more stringent monitoring[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk) - The material weakness will not be considered remediated until remedial controls operate for a sufficient period and are tested as effective[175](index=175&type=chunk) [Part II. Other Information](index=43&type=section&id=Part%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in legal proceedings but does not expect any material adverse effect on its financial condition or results of operations, except as noted in Note 11 - The company is party to litigation, but does not expect any current or pending legal action to have a **material adverse effect** on its financial condition or results of operations, except as noted in Note 11[178](index=178&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the 2022 10-K; readers should consider these factors, as disclosure does not imply the risk has not already materialized - No material changes in risk factors from the 2022 10-K[180](index=180&type=chunk) - Readers should consider risk factors, understanding that disclosure does not imply the risk has not already materialized[180](index=180&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has not purchased equity securities, has never paid cash dividends, and intends to retain earnings for business development, with future dividends subject to regulatory and debt restrictions - The company has never declared or paid cash dividends and intends to retain all funds for business development and expansion, with no anticipated cash dividends in the foreseeable future[183](index=183&type=chunk) - Dividend payments by regulated insurance subsidiaries are subject to restrictions from state insurance laws and regulations, requiring prior approval for extraordinary dividends[184](index=184&type=chunk)[185](index=185&type=chunk) - The Term Loan covenants restrict the company from declaring or making cash dividends or repurchasing common stock outside of specified limits[187](index=187&type=chunk) [Item 3. Defaults Upon Senior Securities](index=46&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is marked as "Not applicable," indicating no defaults upon senior securities - This section is not applicable, indicating no defaults upon senior securities[189](index=189&type=chunk) [Item 4. Mine Safety Disclosures](index=47&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is marked as "Not applicable," indicating no mine safety disclosures - This section is not applicable, indicating no mine safety disclosures[191](index=191&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) This item is marked as "None," indicating no other information to disclose - This section is marked "None," indicating no other information to disclose[193](index=193&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, warrant agreements, employment agreements, and certifications - The exhibits include **organizational documents** (Certificate of Incorporation, Bylaws), **warrant agreements** (Carvana), **executive employment and retention agreements**, and **certifications** (Principal Executive Officer, Principal Financial Officer)[196](index=196&type=chunk)