Root(US:ROOT)2025-08-06 20:09Part I. Financial Information Item 1. Financial Statements Root, Inc. achieved net income of $22.0 million in Q2 2025 and $40.4 million in H1 2025, driven by increased net premiums and improved loss ratios Condensed Consolidated Balance Sheets Total assets grew to $1.59 billion by June 30, 2025, primarily from increased cash and premiums receivable, while stockholders' equity rose to $244.5 million Balance Sheet Summary (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $1,587.7 | $1,495.7 | | Total Investments | $327.1 | $311.2 | | Cash and cash equivalents | $641.4 | $599.3 | | Total Liabilities | $1,231.2 | $1,180.0 | | Loss and loss adjustment expense reserves | $444.5 | $413.2 | | Unearned premiums | $395.2 | $353.9 | | Long-term debt | $200.1 | $200.1 | | Total Stockholders' Equity | $244.5 | $203.7 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) The company achieved profitability with $22.0 million net income in Q2 2025 and $40.4 million in H1 2025, fueled by a 34.9% increase in net premiums earned Statement of Operations Highlights (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $382.9 | $289.2 | $732.3 | $544.1 | | Net Premiums Earned | $353.0 | $261.6 | $674.3 | $491.9 | | Operating Income | $27.3 | $3.8 | $51.0 | $9.2 | | Net Income (Loss) | $22.0 | $(7.8) | $40.4 | $(14.0) | | Diluted EPS | $1.29 | $(0.52) | $2.36 | $(0.95) | Condensed Consolidated Statements of Cash Flows Net cash from operations was $78.8 million in H1 2025, with overall cash and equivalents increasing by $42.2 million due to reduced investing activities Cash Flow Summary - Six Months Ended June 30 (in millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $78.8 | $77.1 | | Net cash used in investing activities | $(17.6) | $(74.3) | | Net cash used in financing activities | $(19.0) | $(14.3) | | Net increase (decrease) in cash | $42.2 | $(11.5) | | Cash at end of period | $642.5 | $668.2 | Notes to Condensed Consolidated Financial Statements Key notes detail the investment portfolio, favorable prior-year loss development, reduced reinsurance reliance, and share-based compensation - The company's investment portfolio of $322.7 million (fair value) is concentrated in high-quality securities, with 93.9% rated A- or higher as of June 30, 20253742 - For the six months ended June 30, 2025, the company experienced favorable prior-year loss development, reducing incurred losses by $14.0 million, primarily from lower-than-expected reported losses from accident year 202446 - The company significantly reduced its reliance on reinsurance, with ceded premiums written decreasing by 72.6% in Q2 2025 and 66.0% in H1 2025 compared to the prior-year periods47114124 - No warrant compensation expense was recognized in H1 2025 related to the Carvana agreement, compared to $3.8 million in H1 2024, as all short-term warrants have vested55 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Improved performance and profitability resulted from policy growth, rate actions, and reduced reinsurance, leading to a 95.2% net combined ratio in Q2 2025 Key Performance Indicators Policies in force grew to 455,493, with the net combined ratio improving to 95.2% and Adjusted EBITDA reaching $37.6 million in Q2 2025 Key Performance Indicators Summary | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Policies in force | 455,493 | 406,283 | 455,493 | 406,283 | | Gross premiums written | $346.2M | $308.2M | $757.0M | $638.9M | | Net income (loss) | $22.0M | $(7.8)M | $40.4M | $(14.0)M | | Direct contribution | $125.8M | $87.0M | $252.9M | $167.7M | | Adjusted EBITDA | $37.6M | $12.1M | $69.5M | $27.2M | | Net combined ratio | 95.2% | 102.7% | 95.4% | 102.4% | | Gross accident period loss ratio | 59.6% | 61.0% | 57.7% | 59.6% | Results of Operations Total revenues increased 32.4% in Q2 2025, driven by net premiums earned, leading to operating income of $27.3 million and a lower net loss ratio - Q2 2025 net premiums earned increased by 34.9% YoY, driven by growth in policies, higher premiums per policy, and a strategic reduction in ceded premiums to 4.9% of gross premiums earned from 15.1% in Q2 2024112113114 - The gross accident period loss ratio for Q2 2025 improved to 59.6% from 61.0% YoY, attributed to rate actions and favorable weather, which offset higher claims severity117 - Q2 2025 Other Insurance Expense increased by 70.5% YoY, primarily due to higher commission expenses from partnership channel growth and a $6.0 million decrease in contra-expense from ceding commissions due to reduced reinsurance112119 - Interest expense for Q2 2025 decreased by 54.3% YoY to $5.3 million, resulting from a more favorable interest rate on the Amended Term Loan112121 Liquidity and Capital Resources The company holds $641.4 million in cash and equivalents, with $314.2 million unrestricted, ensuring sufficient liquidity for the next 12 months - The company maintains a strong liquidity position with $641.4 million in cash and cash equivalents, of which $314.2 million is held at the parent company level, free from regulatory restrictions146 - Management believes existing cash and operational cash flow will be sufficient to support requirements for at least the next 12 months147 - During H1 2025, insurance subsidiaries distributed dividends totaling $35.0 million to the parent company after receiving regulatory approval142144 Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the company's market risk disclosures from its 2024 Annual Report on Form 10-K - There have been no material changes in the quantitative and qualitative market risk disclosures from the 2024 10-K159 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of June 30, 2025160 - No material changes to the company's internal control over financial reporting occurred during the quarter ended June 30, 2025161 Part II. Other Information Item 1. Legal Proceedings The company is not party to any current or pending legal action reasonably expected to have a material adverse effect on its financial condition or operations - The company is not party to any legal proceedings expected to have a material adverse effect on its financials164 Item 1A. Risk Factors There have been no material changes to the company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes have occurred in the company's risk factors since the filing of the 2024 10-K166 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company has never paid cash dividends and does not plan to, with payments restricted by regulations and debt covenants - The company has never paid cash dividends and does not plan to in the foreseeable future168 - Dividend payments are restricted by both insurance regulations and covenants in the Amended Term Loan169172 Item 5. Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025 - No directors or officers made changes to their Rule 10b5-1 or other trading arrangements during Q2 2025175 Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including certifications and equity incentive plan documents