ROOT

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission on February 25, 2026, or the 2025 10-K. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading “Risk Factors” in this Quarterly Report on Form 10-Q and in the 2025 10-K for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements. Our Business Root is a technology insurance company founded on the idea that car insurance rates should be based primarily on driving behaviors, not demographics. We are revolutionizing the archaic car insurance industry by using modern technology, telematics, and data science to offer fair, personalized rates to good drivers. We believe our competitive advantage is derived from our ability to efficiently and effectively bind auto insurance policies quickly, through direct and partnership channels, aided by segmenting individual risk to price better drivers more fairly. Our customer experience is built for ease of use and a product offering made possible with our full-stack insurance structure. These are all uniquely integrated into a single cloud-based technology platform that captures the entire insurance value chain—from customer acquisition to underwriting to claims administration and ongoing customer engagement. This unified platform enhances pricing accuracy, strengthens operating efficiency, and supports a more seamless customer experience, while creating a defensible, technology- and data-driven advantage that compounds over time. To scale the business, we aim to drive new customer growth and optimize unit economics via our two distribution channels: direct and partnership. The direct channel efficiently drives volume from high-intent customers by reaching them where they are already shopping for insurance, such as search engines or select marketplaces they actively use. The data science model continuously seeks to optimize bidding strategies that fine-tune our prices to strike a balance between offering a competitive price and achieving target unit economics. The partnership channel provides differentiated access to high intent customers, primarily in the automotive, financial services, and independent agent sectors. We build upon or within the mobile and web customer experiences of distribution partners to reach a captive customer base with an embedded solution, which can even remove the need for the customer to ever visit a Root website to purchase and bind a policy. We use technology to drive efficiency across the organization within distribution, underwriting, policy administration, and claims. Although we believe we are priced adequately in a majority of the states in which we operate, our technology- and data-driven approach to pricing and underwriting allows for rapid response to macroeconomic trends and competitive dynamics through quick, timely, and appropriate rate actions. We continue to release iterations of our pricing models that incorporate enhanced telematics features, new rating variables, upgraded loss models, and improved risk segmentation. These enhancements strengthen our ability to select risks more precisely and maintain pricing accuracy as conditions evolve. Claims operations remain a critical driver of our unit economics and long-term competitiveness. We continue to invest in automation, workflow optimization, and advanced analytical tools designed to improve accuracy, speed, and consistency in claims handling. Improvements to the claim process not only support customer satisfaction but also reinforces the stability of loss ratios and improves long-term cost efficiency by reducing operating expenses. Through continued investment in and diversification of our distribution channels, leveraging our proprietary technology and data science and focusing on partnerships with automotive, financial services, and independent agents, we believe this will position us for a sustainable, long-term and profitable path for growth. 23 As a full-stack insurance company, we currently employ a “capital-efficient” model, which utilizes a variety of reinsurance structures. These include excess of loss and quota share reinsurance. Excess of loss provides us with volatility protection against a portion of large individual losses or an aggregation of losses from catastrophes. Quota share provides, among other advantages, regulatory surplus relief for growing companies. We primarily utilize reinsurance to mitigate the impact of large losses or tail events. We continuously evaluate our utilization of third-party reinsurance in order to operate a capital-efficient business model. As our gross loss ratios have stabilized, we strategically reduced the utilization of external quota share to balance the cost of reinsurance with capital efficiency. Over the long term, we expect to maintain the flexibility to modify our reinsurance program. Recent Developments Affecting Comparability General Macroeconomic Factors Changing global economic conditions have led to inflationary pressures, supply chain disruptions, changes in interest rates and volatility in equity markets. In addition, economic uncertainty has risen as a result of geopolitical instability and changes in tariff policy. There remains uncertainty around the future of inflation. Elevated levels of inflation for an extended period could cause claims and claim expenses to increase, impact the performance of our investment portfolio, increase nonpayment cancellations or have other adverse effects, including variability in the competitive environment. We have also seen an increase in vehicle repair and medical costs, which are affected by inflation. These cost increases have resulted in greater claims severity. We continue to file in multiple states to establish rates that more closely follow the evolving loss cost trends. Fluctuations in interest rates could impact our cost of capital and may limit our ability to raise additional capital. Comprehensive Reinsurance We have significantly reduced the utilization of reinsurance through a strategic reduction of external quota share. The changes to the reinsurance program aim to deliver improved economics. Our diversified approach to reinsurance allows us to optimize capital requirements while remaining flexible in response to changes in market conditions or changes specific to our own business. We may choose to amend, commute, and/or non-renew certain third-party reinsurance arrangements in the future, which may result in us retaining more or less of our business. To the extent we retain a larger share of our book of business, our capital requirements may increase. 24 Key Performance Indicators We regularly review a number of metrics, including the following key performance indicators, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. In addition to our financial results prepared in accordance with accounting principles generally accepted in the United States, or GAAP, we believe these non-GAAP and operational measures are useful in evaluating our performance. See the section titled “—Non-GAAP Financial Measures” for additional information regarding our use of direct contribution and adjusted EBITDA and their reconciliations to the most directly comparable GAAP measures. Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (dollars in millions, except premiums per policy) Policies in force 483,921 455,493 483,921 455,493 Premiums per policy $ 1,479 $ 1,616 $ 1,479 $ 1,616 Premiums in force $ 1,431.7 $ 1,472.2 $ 1,431.7 $ 1,472.2 Gross premiums written $ 339.7 $ 346.2 $ 728.7 $ 757.0 Gross premiums earned $ 368.1 $ 371.3 $ 738.4 $ 715.7 Gross profit $ 90.9 $ 101.7 $ 198.8 $ 208.8 Net income $ 25.4 $ 22.0 $ 61.3 $ 40.4 Direct contribution $ 124.0 $ 125.8 $ 264.5 $ 252.9 Adjusted EBITDA $ 43.8 $ 37.6 $ 100.6 $ 69.5 Net loss and LAE ratio 66.0 % 66.1 % 64.1 % 65.1 % Net expense ratio 26.1 % 29.1 % 27.6 % 30.3 % Net combined ratio 92.1 % 95.2 % 91.7 % 95.4 % Gross loss ratio 58.7 % 58.0 % 56.6 % 57.1 % Gross LAE ratio 7.3 % 7.3 % 7.2 % 7.0 % Gross expense ratio 25.9 % 29.0 % 27.5 % 30.1 % Gross combined ratio 91.9 % 94.3 % 91.3 % 94.2 % Gross accident period loss ratio 61.6 % 57.4 % 59.7 % 56.0 % Policies in Force We define policies in force as the number of current and active auto insurance policyholders underwritten by us as of the period end date. We view policies in force as an important metric to assess our financial performance because policy growth and retention drives our revenue growth, expands brand awareness, deepens our market penetration, and generates additional data to continue to improve the functioning of our platform. Premiums per Policy We define premiums per policy as the ratio of gross premiums written on auto insurance policies in force at the end of the period divided by policies in force. We view premiums per policy as an important metric since the higher the premiums per policy, the greater the amount of earned premium we expect from each policy. 25 Premiums in Force We define premiums in force as premiums per policy multiplied by policies in force multiplied by two. We view premiums in force as an estimate of annualized run rate of gross premiums written as of a given period. Since our auto policies are six-month policies, we multiply this figure by two in order to determine an annualized amount of premiums in force. We view this as an important metric because it is an indicator of the size of our portfolio of policies as well as an indicator of expected earned premium over the coming 12 months. Premiums in force is not a forecast of future revenue nor is it a reliable indicator of revenue expected to be earned in any given period. We believe that our calculation of premiums in force is useful to investors and analysts because it captures the impact of fluctuations in customers and premiums per policy at the end of each reported period, without adjusting for known or projected policy updates, cancellations and non-renewals. Gross Premiums Written We define gross premiums written as the total amount of gross premium on policies that were bound during the period less the prorated impact of policy cancellations. Gross premiums written includes direct premiums and assumed premiums. We view gross premiums written as an important metric because it is the metric that most closely correlates with changes in gross premiums earned. We use gross premiums written, which excludes the impact of premiums ceded to reinsurers, to manage our business because we believe that it reflects the business volume and direct economic benefit generated by our customer acquisition activities, which along with our underlying underwriting and claims operations (gross loss ratio and gross loss adjustment expense, or LAE), are the key drivers of our future profit opportunities. Additionally, premiums ceded to reinsurers can change significantly based on the type and mix of reinsurance structures we use, and, as such, we have the optionality to fully retain the premiums from customers acquired in the future. Gross Premiums Earned We define gross premiums earned as the amount of gross premium that was earned during the period. Premiums are earned over the period in which insurance protection is provided, which is typically six months. Gross premiums earned includes direct premiums and assumed premiums. We view gross premiums earned as an important metric as it allows us to evaluate our premium levels prior to the impacts of reinsurance. It is the primary driver of our consolidated GAAP revenues. As with gross premiums written, we use gross premiums earned, which excludes the impact of premiums ceded to reinsurers to manage our business, because we believe that it reflects the business volume and direct economic benefit generated by our customer acquisition activities which, along with our underlying underwriting and claims operations (gross loss ratio and gross LAE), are the key drivers of our future profit opportunities. Gross Profit We define gross profit as total revenue minus net loss and LAE and other insurance expense. We view gross profit as an important metric because we believe it is informative of the financial performance of our core insurance business. Direct Contribution We define direct contribution, a non-GAAP financial measure, as gross profit excluding net investment income, net realized gains on investments, acquisition expenses which include report costs and commission expenses related to our partnership channel, and fixed expenses, which include certain warrant compensation expense related to policies originating through the integrated automobile insurance solution for Carvana’s online buying platform, or Integrated Platform, overhead allocated based on headcount, or Overhead, and salaries, health benefits, bonuses, employee retirement plan-related expenses and employee share-based compensation expense, or Personnel Costs, licenses, professional fees and other expenses. Further impacts related to reinsurance are excluded, and these consist of ceded premiums earned, ceded loss and LAE, and net ceding commission and other. Net ceding commission and other is comprised of ceding commission received in connection with reinsurance ceded, partially offset by amortization of excess ceding commission, and other impacts of reinsurance ceded which are included in other insurance expense. After these adjustments, the resulting calculation is inclusive of only those gross variable costs of 26 revenue incurred on the successful acquisition of business. We view direct contribution as an important metric because we believe it measures profitability of our total policy portfolio prior to the impact of reinsurance. See the section titled “—Non-GAAP Financial Measures” for a reconciliation of total revenue to direct contribution. Adjusted EBITDA We define adjusted EBITDA, a non-GAAP financial measure, as net income excluding interest expense, income tax expense, depreciation and amortization, share-based compensation, loss on extinguishment of debt, warrant compensation expense, restructuring charges, certain legal fees and other items that do not reflect our ongoing operating performance. After these adjustments, the resulting calculation represents expenses directly attributable to our operating performance. We use adjusted EBITDA as an internal performance measure in the management of our operations because we believe it provides management and other users of our financial information useful insight into our results of operations and underlying business performance. Adjusted EBITDA should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define adjusted EBITDA differently. See the section titled “—Non-GAAP Financial Measures” for a reconciliation of net income to adjusted EBITDA. Net Loss and LAE Ratio We define net loss and LAE ratio, expressed as a percentage, as the ratio of net loss and LAE to net premiums earned. We view net loss and LAE ratio as an important metric because it allows us to evaluate loss trends as a percentage of net premiums, and we believe it is useful for investors to evaluate those separately from other operating expenses. Net Expense Ratio We define net expense ratio, expressed as a percentage, as the ratio of all operating expenses less loss and LAE and less fee income to net premiums earned. We view net expense ratio as important because it allows us to analyze our expense and acquisition trends, net of fee income, and allows investors to evaluate these expenses exclusive of our loss and LAE. Net Combined Ratio We define net combined ratio, expressed as a percentage, as the sum of net loss and LAE ratio and net expense ratio. We view net combined ratio as important because it allows us to analyze our underwriting result trends and is a key indicator of overall profitability and health of the overall business. We believe it is useful to investors to evaluate these components separately and in the aggregate when reviewing our underwriting performance. A net combined ratio under 100% indicates an underwriting profit, while a net combined ratio greater than 100% indicates an underwriting loss. Gross Loss Ratio We define gross loss ratio, expressed as a percentage, as the ratio of gross losses to gross premiums earned. Gross loss ratio excludes LAE. We view gross loss ratio as an important metric because it allows us to evaluate incurred losses and LAE separately prior to the impact of reinsurance. Gross LAE Ratio We define gross LAE ratio, expressed as a percentage, as the ratio of gross LAE to gross premiums earned. We view gross LAE ratio as an important metric because it allows us to evaluate incurred losses and LAE separately prior to the impact of reinsurance. 27 Gross Expense Ratio We define gross expense ratio, expressed as a percentage, as the ratio of gross operating expenses less loss and LAE and less fee income to gross premiums earned. We view gross expense ratio as important because it allows us to analyze the underlying expense base of the business and establish expense targets, prior to the impact of reinsurance. We believe gross expense ratio is useful for investors to further evaluate business health and performance, prior to the impact of reinsurance. Gross Combined Ratio We define gross combined ratio, expressed as a percentage, as the sum of the gross loss ratio, gross LAE ratio and gross expense ratio. We view gross combined ratio as important because it allows us to evaluate financial performance and establish targets that we believe more closely reflect the underlying performance and profitability of the business prior to reinsurance. Further, we believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our gross underwriting performance. A gross combined ratio under 100% indicates an underwriting profit while a gross combined ratio greater than 100% indicates an underwriting loss, prior to the impact of reinsurance. Gross Accident Period Loss Ratio Gross accident period loss ratio, expressed as a percentage, represents all losses and claims expected to arise from insured events that occurred during the applicable period regardless of when they are reported and finally settled divided by gross premiums earned for the same period. The gross accident period loss ratio is remeasured each reporting period to reflect updated estimates of ultimate losses as they develop. Changes to our loss reserves are the primary driver of differences between our gross accident period loss ratio and gross loss ratio. We believe that gross accident period loss ratio is useful in evaluating expected losses prior to the impact of reinsurance. Components of Our Results of Operations Revenue We generate revenue from net premiums earned, net investment income, net realized gains on investments, fee income and other income. Net Premiums Earned Premiums written are deferred and earned pro rata over the policy period. Net premiums earned represents the earned portion of our gross premiums written, less the earned portion that is ceded to third-party reinsurers under our reinsurance agreements. Net Investment Income Net investment income represents interest earned from our cash, cash equivalents, restricted cash and restricted cash equivalents, fixed maturities, and short-term investments less investment expenses. Investment expenses include costs associated with the management of our investment portfolio, including Personnel Costs. Net investment income also includes impairments related to low-income housing tax credits investments in limited liability entities to offset certain state premium taxes. These tax credits are recognized when utilized. In addition, net investment income includes impairment losses related to our private equity investments. Net investment income is directly correlated with the overall size of our cash and investment portfolio, market level of interest rates and changes in the fair value of our private equity investments. Net investment income will vary with the size and composition of our investment portfolio, market returns and the investment strategy. Net Realized Gains on Investments Net realized gains on investments represents the difference between the amount received by us on the sale of an investment as compared to the investment’s amortized cost basis. 28 Fee Income Fee income consists primarily of the flat fee we charge for installment payments which relates to the additional administrative costs associated with processing more frequent billings. These fees are recognized in the period in which we process the installment. We also charge policy fees, which are typically nonrefundable fees that are intended to reimburse a portion of the costs incurred to underwrite the policy. These fees are recognized ratably over the policy coverage period. Fee income also includes late payment fees that are collected from our policyholders. These fees are recognized in the period in which we process the late payment. Other Income Other income is primarily comprised of revenue earned from distributing website and mobile application policy inquiry leads in geographies where we do not have a presence, recognized when we generate the lead. Operating Expenses Our operating expenses consist of loss and LAE, sales and marketing, other insurance expense, technology and development, and general and administrative expenses. Loss and Loss Adjustment Expenses Loss and LAE include the costs incurred for claims, payments made and estimated future payments to be made to or on behalf of our policyholders, including expenses needed to adjust or settle claims, net of amounts ceded to reinsurers. Loss and LAE include an amount determined using adjuster determined case-base estimates for reported claims and actuarial determined unpaid claim estimates using past experience and historical emergence patterns for unreported losses and LAE. These reserves are a liability established to cover the estimated ultimate cost to settle insured losses. The unpaid loss estimates consider loss trends, mix of business, and other risk factors impacting claims settlement. The method used to estimate unpaid LAE liability is based on claims transaction data, including the relative cost of adjusting and settling a range of claim types from express material damage claims to more complex injury cases. Loss and LAE are net of amounts ceded to reinsurers. We enter into reinsurance contracts to limit our exposure to potential losses as well as to provide additional capacity to write more business. These expenses are a function of the size and term of the insurance policies we write and the loss experience associated with the underlying risks. This includes an allowance for credit losses based on the probability of default and expected loss given default of a reinsurer. Loss and LAE may be paid out over a period of years. Various other expenses incurred during claims processing are considered LAE. These amounts include Personnel Costs for claims-related employees, vendor expenses, software expense, internally developed software amortization, and Overhead. Sales and Marketing Sales and marketing includes both acquisition and fixed expenses. We view direct performance marketing, experimental marketing, channel media, advertising and referral fees as acquisition expenses. We view sponsorship, Personnel Costs and Overhead related to our brand strategy, creative and business development activities, and certain data science activities as fixed expenses. Sales and marketing are expensed as incurred. We plan to continue investing in and diversifying our marketing channels to attract and acquire new customers, increase our brand awareness, and expand our product offerings within certain markets. We expect that our sales and marketing will vary based upon the competitive environment and other investments in acquisition. Over the long term we expect it will decrease as a percentage of revenue as the proportion of renewals to our total business increases. 29 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 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, certain warrant compensation expenses related to policies originating through the integrated automobile insurance solution for Carvana’s online buying 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. Low income housing tax credits are recognized when utilized. Other insurance expense is recognized 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. 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; Personnel Costs and Overhead for engineering, product, technology, and certain data science activities; and amortization of internally developed software. Technology and development is expensed as incurred, except for development and testing costs related to internally developed software that are capitalized and subsequently amortized over the expected useful life. Over time, we expect technology and development to decrease as a percentage of revenue. General and Administrative General and administrative are fixed expenses that primarily relate to external professional service expenses; Personnel Costs and Overhead for corporate functions; and depreciation expense for computers, furniture and other fixed assets. General and administrative expenses are expensed as incurred. We expect general and administrative expenses to decrease as a percentage of total revenue over time. Non-Operating Expenses Our non-operating expenses consist of interest expense, loss on extinguishment of debt, and income tax expense and are included below operating expenses. Interest Expense Interest expense primarily relates to interest incurred on our long-term debt, certain fees that are expensed as incurred and amortization of discount and debt issuance costs. Loss on Extinguishment of Debt Loss on extinguishment of debt primarily relates to the difference between the reacquisition price of the debt and the net carrying amount of the extinguished debt. Upon extinguishment of debt, the remaining unamortized debt discount and issuance costs, and prepayment premium are recognized as expense. 30 Income Tax Expense Income tax expense consists primarily of state income taxes in the United States. We have recorded United States federal and state net deferred tax assets for which we provide a full valuation allowance, which includes net operating loss carryforwards and tax credits. Given our anticipated future earnings, we believe there is a reasonable possibility that in the foreseeable future, sufficient positive evidence may become available to reach a conclusion that all or a portion of the valuation allowance may no longer be needed. Release of the valuation allowance would result in recognition of certain deferred tax assets and a corresponding material income tax benefit for the period the release is recorded. The exact timing and amount of the valuation allowance release would depend on our financial performance, projected taxable income in the relevant jurisdictions, and ongoing evaluation of available positive and negative evidence. Results of Operations Comparison of the Three Months Ended June 30, 2026 and 2025 The following table presents our results of operations for the periods indicated: Three Months Ended June 30, 2026 2025 $ Change % Change (dollars in millions) Revenues: Net premiums earned $ 363.5 $ 353.0 $ 10.5 3.0 % Net investment income 5.0 9.4 (4.4) (46.8) % Fee income 19.8 19.7 0.1 0.5 % Other income 0.9 0.8 0.1 12.5 % Total revenues 389.2 382.9 6.3 1.6 % Operating expenses: Loss and loss adjustment expenses 239.9 233.3 6.6 2.8 % Sales and marketing 25.3 37.1 (11.8) (31.8) % Other insurance expense 58.4 47.9 10.5 21.9 % Technology and development 15.5 13.7 1.8 13.1 % General and administrative 15.5 23.6 (8.1) (34.3) % Total operating expenses 354.6 355.6 (1.0) (0.3) % Operating income 34.6 27.3 7.3 26.7 % Interest expense 4.1 5.3 (1.2) (22.6) % Loss on extinguishment of debt 4.9 — 4.9 100 % Income before income tax expense 25.6 22.0 3.6 16.4 % Income tax expense 0.2 — 0.2 100.0 % Net income 25.4 22.0 3.4 15.5 % Other comprehensive (loss) income: Changes in net unrealized (losses) gains on investments (2.4) 1.6 (4.0) (250.0) % Comprehensive income $ 23.0 $ 23.6 $ (0.6) (2.5) % 31 Revenue Net Premiums Earned Net premiums earned increased primarily due to reduced cessions of gross premiums earned to reinsurers between periods and an increase in policies in force as a result of continued growth in our partnership channel, partially offset by a decrease in premiums per policy resulting from a shift in customer and state mix. During the three months ended June 30, 2026 and 2025, we ceded approximately 1.2% and 4.9% of our gross premiums earned, respectively. The change in cessions between periods was primarily driven by a strategic reduction of quota share reinsurance. The following table presents gross premiums written, ceded premiums written, net premiums written, gross premiums earned, ceded premiums earned and net premiums earned for the three months ended June 30, 2026 and 2025: Three Months Ended June 30, 2026 2025 $ Change % Change (dollars in millions) Gross premiums written $ 339.7 $ 346.2 $ (6.5) (1.9) % Ceded premiums written (2.3) (12.2) 9.9 (81.1) % Net premiums written 337.4 334.0 3.4 1.0 % Gross premiums earned 368.1 371.3 (3.2) (0.9) % Ceded premiums earned (4.6) (18.3) 13.7 (74.9) % Net premiums earned $ 363.5 $ 353.0 $ 10.5 3.0 % Gross premiums written decreased for the three months ended June 30, 2026, primarily due to a decline in new writings in our direct channel as a result of lower direct performance marketing spend. This was primarily driven by heightened competition in the marketing environment. This was partially offset by continued growth in new writings in our partnership channel compared to the same period in 2025. The decrease in gross premiums earned was primarily due to a decrease in premiums per policy, partially offset by greater policies in force compared to the same period in 2025. Net Investment Income Net investment income decreased primarily due to a $4.4 million impairment loss recognized on an equity investment. The impairment loss included the reversal of $3.8 million of previously recognized unrealized gains, and the initial cash investment of $0.6 million. Operating Expenses Loss and Loss Adjustment Expenses Loss and LAE increased due to reduced cessions of losses to reinsurers driven by a strategic reduction of quota share reinsurance for the three months ended June 30, 2026 compared to the same period in 2025. This increase was partially offset by a reduction of loss and LAE reserves on prior periods due to lower than expected reported activity. Gross accident period loss ratio increased to 61.6% for the three months ended June 30, 2026, from 57.4% for the same period in 2025. The change in the ratio was driven by higher loss costs as a result of increased severity per claim due to higher vehicle repair and medical costs and a shift in channel mix. This was partially offset by business tenure mix and favorable weather-related losses. We observed a mid-single digit increase in accident period severity per claim and a low-single-digit increase in claim frequency for the three months ended June 30, 2026 compared to the same period in 2025 across our bodily injury, collision, and property damage coverages. 32 Sales and Marketing Sales and marketing expense decreased due to lower acquisition expense driven by a $10.6 million decrease in direct performance marketing spend. This reduction reflects a continued disciplined deployment of spend to optimize efficiency in a heightened competitive marketing environment, while maintaining returns in line with our estimated targets. Other Insurance Expense Other insurance expense increased primarily due to an increase in our acquisition expenses. This was driven by a $3.9 million increase in commissions paid and increased amortization of deferred policy acquisition costs of $2.7 million. We also experienced a $4.2 million decrease in net ceding commission contra-expense as a result of a decline in ceded premiums written, largely attributable to a strategic reduction of quota share reinsurance. Fixed expenses increased primarily due to a $1.6 million increase in Carvana warrant expense related to our outstanding warrant structure with Carvana. Variable expenses decreased primarily due to a $2.3 million decrease in premium taxes as a result of less gross written premium. General and Administrative General and administrative expense decreased primarily due to an $8.2 million reduction in Personnel Costs. This decline was primarily comprised of a decrease in performance-based restricted stock unit compensation expense resulting from changes in the probability of achieving growth-related performance targets and a decrease in short-term incentive plan compensation expense due to change in expected performance achievement between periods. Non-Operating Expenses Loss on Extinguishment of Debt Loss on extinguishment of debt was due to unamortized debt discount and issuance costs, and prepayment premium being expensed as a result of repayment of our $200.0 million six-year term loan, or Amended Term Loan, in full in the second quarter of 2026. 33 Comparison of the Six Months Ended June 30, 2026 and 2025 The following table presents our results of operations for the periods indicated: Six Months Ended June 30, 2026 2025 $ Change % Change (dollars in millions) Revenues: Net premiums earned $ 727.2 $ 674.3 $ 52.9 7.8 % Net investment income 13.7 18.1 (4.4) (24.3) % Net realized gains on investments 0.1 — 0.1 100.0 % Fee income 40.1 38.4 1.7 4.4 % Other income 1.6 1.5 0.1 6.7 % Total revenues 782.7 732.3 50.4 6.9 % Operating expenses: Loss and loss adjustment expenses 466.1 438.9 27.2 6.2 % Sales and marketing 52.6 88.6 (36.0) (40.6) % Other insurance expense 117.8 84.6 33.2 39.2 % Technology and development 30.7 25.1 5.6 22.3 % General and administrative 40.0 44.1 (4.1) (9.3) % Total operating expenses 707.2 681.3 25.9 3.8 % Operating income 75.5 51.0 24.5 48.0 % Interest expense 8.9 10.6 (1.7) (16.0) % Loss on extinguishment of debt 4.9 — 4.9 100.0 % Income before income tax expense 61.7 40.4 21.3 52.7 % Income tax expense 0.4 — 0.4 100.0 % Net income 61.3 40.4 20.9 51.7 % Other comprehensive (loss) income: Changes in net unrealized (losses) gains on investments (5.9) 4.6 (10.5) (228.3) % Comprehensive income $ 55.4 $ 45.0 $ 10.4 23.1 % Revenue Net Premiums Earned Net premiums earned increased primarily due to reduced cessions of gross premiums earned to reinsurers between periods and an increase in policies in force as a result of continued growth in our partnership channel, partially offset by a decrease in premiums per policy resulting from a shift in customer and state mix. During the six months ended June 30, 2026 and 2025, we ceded approximately 1.5% and 5.8% of our gross premiums earned, respectively. The change in cessions between periods was primarily driven by a strategic reduction of quota share reinsurance. 34 The following table presents gross premiums written, ceded premiums written, net premiums written, gross premiums earned, ceded premiums earned and net premiums earned for the six months ended June 30, 2026 and 2025: Six Months Ended June 30, 2026 2025 $ Change % Change (dollars in millions) Gross premiums written $ 728.7 $ 757.0 $ (28.3) (3.7) % Ceded premiums written (7.9) (31.0) 23.1 (74.5) % Net premiums written 720.8 726.0 (5.2) (0.7) % Gross premiums earned 738.4 715.7 22.7 3.2 % Ceded premiums earned (11.2) (41.4) 30.2 (72.9) % Net premiums earned $ 727.2 $ 674.3 $ 52.9 7.8 % Gross premiums written decreased for the six months ended June 30, 2026, primarily due to a decline in new writings in our direct channel as a result of lower direct performance marketing spend. This was primarily driven by heightened competition in the marketing environment and slower growth during the tax refund season in 2026, compared to 2025, which benefited from a pull-forward of demand driven by concerns around tariff policy. This was partially offset by continued growth in new writings in our partnership channel compared to the same period in 2025. The increase in gross premiums earned was primarily due to greater policies in force, partially offset by a decrease in premiums per policy compared to the same period in 2025. Net Investment Income Net investment income decreased primarily due to a $4.4 million impairment loss recognized on an equity investment. The impairment loss included the reversal of $3.8 million of previously recognized unrealized gains, and the initial cash investment of $0.6 million. Operating Expenses Loss and Loss Adjustment Expenses Loss and LAE increased due to additional losses incurred on increased gross premiums earned volume and reduced cessions of losses to reinsurers driven by a strategic reduction of quota share reinsurance for the six months ended June 30, 2026 compared to the same period in 2025. This volume-driven increase was partially offset by a reduction of loss and LAE reserves on prior periods due to lower than expected reported activity and the identification of additional subrogation opportunities resulting from model improvements. Gross accident period loss ratio increased to 59.7% for the six months ended June 30, 2026, from 56.0% for the same period in 2025. The change in the ratio was driven by higher loss costs as a result of increased severity per claim due to higher vehicle repair and medical costs and a shift in channel mix. This was partially offset by favorable weather-related losses and business tenure mix. We observed a mid-single digit increase in accident period severity per claim, while claim frequency remained consistent for the six months ended June 30, 2026 compared to the same period in 2025 across our bodily injury, collision, and property damage coverages. Sales and Marketing Sales and marketing expense decreased due to lower acquisition expense driven by a $35.4 million decrease in direct performance marketing spend. This reduction reflects a continued disciplined deployment of spend to optimize efficiency in a heightened competitive marketing environment, while maintaining returns in line with our estimated targets. The decrease was also influenced by slower new writing growth during the tax refund season in 2026, compared to 2025, which benefited from a pull-forward of demand driven by concerns around tariff policy. 35 Other Insurance Expense Other insurance expense increased primarily due to an increase in our acquisition expenses. This was driven by a $12.8 million increase in commissions paid, increased amortization of deferred policy acquisition costs of $5.3 million, and a $3.2 million increase in partnership expenses related to the continued growth in our partnership channel, including the build-out and appointment of independent agents. We also experienced a $8.8 million decrease in net ceding commission contra-expense as a result of a decline in ceded premiums written, largely attributable to a strategic reduction of quota share reinsurance. Fixed expenses increased primarily due to a $3.5 million increase in Carvana warrant expense related to our outstanding warrant structure with Carvana. Variable expenses decreased primarily due to a $1.7 million decrease in premium taxes as a result of less gross premiums written. Technology and Development Technology and development expense increased primarily due to a $5.3 million increase in Personnel Costs, driven by increased headcount which reflects a continued investment in our product delivery teams and technology. General and Administrative General and administrative expense decreased primarily due to a $4.6 million reduction in Personnel Costs. This decline was primarily comprised of a decrease in short-term incentive plan compensation expense due to change in expected performance achievement between periods and a decrease in performance-based restricted stock unit compensation expense resulting from changes in the probability of achieving growth-related performance targets. Non-Operating Expenses Loss on Extinguishment of Debt Loss on extinguishment of debt was due to unamortized debt discount and issuance costs, and prepayment premium being expensed as a result of the repayment of our Amended Term Loan in full in the second quarter of 2026. Other Comprehensive (Loss) Income Changes in Net Unrealized (Losses) Gains on Investments Changes in net unrealized (losses) gains on investments decreased to net unrealized losses primarily due to an increase in market interest rates and widening credit spreads during the period, influenced by broader macroeconomic and geopolitical uncertainties, which negatively impacted the fair value of fixed maturity securities. 36 Non-GAAP Financial Measures The non-GAAP financial measures below have not been calculated in accordance with GAAP and should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results. In addition, direct contribution and adjusted EBITDA should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions. Therefore, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies. Our management uses these non-GAAP financial measures, in conjunction with GAAP financial measures, as an integral part of managing our business and to, among other things: (1) monitor and evaluate the performance of our business operations and financial performance; (2) facilitate internal comparisons of the historical operating performance of our business operations; (3) facilitate external comparisons of the results of our overall business to the historical operating performance of other companies that may have different capital structures and debt levels; (4) review and assess the operating performance of our management team, including when determining incentive compensation; (5) analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (6) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments. Direct Contribution For the definition of direct contribution and why management believes this measure provides useful information to investors, see “—Key Performance Indicators.” The following table provides a reconciliation of total revenue to direct contribution for the three and six months ended June 30, 2026 and 2025: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (dollars in millions) Total revenue $ 389.2 $ 382.9 $ 782.7 $ 732.3 Loss and loss adjustment expenses (239.9) (233.3) (466.1) (438.9) Other insurance expense (58.4) (47.9) (117.8) (84.6) Gross profit 90.9 101.7 198.8 208.8 Net investment income (5.0) (9.4) (13.7) (18.1) Net realized gains on investments — — (0.1) — Adjustments from other insurance expense(1) 37.1 29.5 75.6 51.7 Ceded premiums earned 4.6 18.3 11.2 41.4 Ceded loss and loss adjustment expenses (3.2) (9.2) (5.1) (19.6) Net ceding commission and other(2) (0.4) (5.1) (2.2) (11.3) Direct contribution $ 124.0 $ 125.8 $ 264.5 $ 252.9 ______________ (1) Adjustments from other insurance expense consists of acquisition expenses, including report costs and commission expenses related to our partnership channel of $32.0 million and $64.7 million for the three and six months ended June 30, 2026, respectively, and $25.0 million and $44.7 million for the three and six months ended June 30, 2025, respectively. Adjustments from other insurance expense also consists of fixed expenses, including warrant compensation expense related to policies originating through the Integrated Platform, Personnel Costs, Overhead, licenses, professional fees and other of $5.1 million and $10.9 million for the three and six months ended June 30, 2026, respectively, and $4.6 million and $7.1 million for the three and six months ended June 30, 2025, respectively. (2) Net ceding commission and other is comprised of ceding commissions received in connection with reinsurance ceded, partially offset by amortization of excess ceding commission and other impacts of reinsurance ceded. 37 Adjusted EBITDA For the definition of adjusted EBITDA and why management believes this measure provides useful information to investors, see “—Key Performance Indicators.” The following table provides a reconciliation of net income to adjusted EBITDA for the three and six months ended June 30, 2026 and 2025: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (dollars in millions) Net income $ 25.4 $ 22.0 $ 61.3 $ 40.4 Adjustments: Interest expense 4.0 5.2 8.6 10.3 Income tax expense 0.2 — 0.4 — Depreciation and amortization 2.7 1.9 5.8 3.9 Share-based compensation 5.0 8.4 16.0 14.8 Loss on extinguishment of debt 4.9 — 4.9 — Warrant compensation expense 1.6 — 3.5 — Restructuring costs(1) — 0.1 — 0.1 Other — — 0.1 — Adjusted EBITDA $ 43.8 $ 37.6 $ 100.6 $ 69.5 ______________ (1) Restructuring costs consist of real estate exit costs which includes depreciation and amortization of zero for the three and six months ended June 30, 2026 and $0.1 million for the three and six months ended June 30, 2025. Liquidity and Capital Resources General Since inception, we have financed operations primarily through sales of insurance policies and the net proceeds we have received from our issuance of stock and debt. Cash generated from operations is highly dependent on being able to efficiently acquire and maintain customers while pricing our insurance products appropriately. We also receive cash dividends from our insurance subsidiaries, whose ability to declare and issue dividends is subject to regulatory restrictions and approval. We are continuously evaluating alternatives for efficiently funding our ongoing operations and reducing our cost of capital. We expect, from time to time, to engage in a variety of financing transactions for such purposes, including the issuance and repurchase of stock, and the issuance, refinancing, repayment, prepayment, redemption, retirement, or other modification or management of our debt. Certain events may impact our liquidity, such as global economic conditions, geopolitical instability, and changes in tariff policy resulting in inflationary pressures, supply chain disruptions, changes in interest rates, changes in equity markets and our utilization of reinsurance. There remains uncertainty around the future of inflation; elevated levels of inflation for an extended period could cause claims and claim expenses to increase, impact the performance of our investment portfolio or have other adverse effects. Conditions in the capital and credit markets, including instability and uncertainty, as well as broader economic factors can also influence the returns, liquidity, valuation, and types of our investments. Additionally, fluctuations in interest rates could impact our cost of capital and may limit our ability to raise additional capital. We utilize reinsurance arrangements to mitigate the impact of large losses or catastrophic events. 38 Over time, our strategy continues to evolve and we may choose to amend, commute, and/or non-renew certain third-party reinsurance agreements, which may result in us retaining more or less of our business in the future. To the extent we retain a larger share of our book of business, our capital requirements may increase. Regulatory Considerations We are organized as a holding company, but our primary operations are conducted by three of our wholly-owned insurance subsidiaries, Root Insurance Company and Root Property & Casualty Insurance Company, both Ohio-domiciled insurance companies, and Root Florida Insurance Company, a Florida-domiciled insurance company. The payment of dividends by our insurance subsidiaries is subject to restrictions set forth in the insurance laws and regulations of the State of Ohio and the State of Florida. Our domestic insurance subsidiaries are not permitted to pay any dividends without approval of the applicable superintendent, commissioner and/or director. During the six months ended June 30, 2026, the Ohio Department of Insurance approved Root Insurance Company to pay two extraordinary dividends. As a result, over that period, $15.0 million was paid to Caret Holdings, Inc., its parent company. If our insurance subsidiaries’ business grows, the amount of capital we are required to maintain to satisfy our risk-based capital requirements may increase significantly. To comply with these regulations, we may be required to maintain capital in the insurance subsidiaries that we would otherwise invest in our growth and operations. As of June 30, 2026, our insurance subsidiaries maintained a risk-based capital level that is in excess of an amount that would require any corrective actions on our part. Our wholly-owned, Cayman Islands-based reinsurance subsidiary, Root Reinsurance Company, Ltd., or Root Re, maintains a Class B(iii) insurer license under the Cayman Islands Monetary Authority, or CIMA. At June 30, 2026, Root Re was subject to compliance with certain capital levels and a net premiums earned to capital ratio up to 15:1, which we maintained as of June 30, 2026. The capital ratio can fluctuate at Root Re’s election, subject to regulatory approval. Root Re’s primary sources of funds are assumed insurance premiums, net investment income and capital contributions from the holding company. These funds are primarily used to pay claims and operating expenses and to purchase investments. Root Re must notify CIMA before it can pay any dividend to the holding company. During the six months ended June 30, 2026, Root Re paid dividends of $30.0 million to Caret Holdings, Inc. Financing Arrangements In May 2026, we prepaid our six-year Amended Term Loan in the aggregate principal amount of $200.0 million in full. The prepayment resulted in a loss on extinguishment of debt of $4.9 million, primarily related to accelerated amortization of debt discount and issuance costs and a prepayment premium. We entered into a senior secured term loan with a principal balance of $200.0 million and a maturity date of May 2029. We are required to make quarterly principal payments starting September 30, 2026 equal to approximately 0.25% of the original principal amount in each of the first two years following the closing date and 1.25% quarterly in the third year, with the unpaid balance due at maturity. Interest is variable and calculated between SOFR plus 3.0% and SOFR plus 3.75% and is payable quarterly in cash. The SOFR margin is based upon the debt-to-capital ratio which is calculated on the last day of each quarter beginning on September 30, 2026 as discussed further in Note 7, “Long-Term Debt,” in the Notes to the Condensed Consolidated Financial Statements - Unaudited. Share Repurchases In May 2026, we announced that our board of directors approved a share repurchase authorization of up to $75.0 million of Class A common stock, or Repurchase Program. We may utilize various methods to effect repurchases, which could include open market purchases, privately negotiated transactions, block purchases, accelerated share repurchase agreements or a combination of methods, including pursuant to trading plans adopted under Rule 10b5-1 under the Exchange Act. The Repurchase Program does not have a set expiration date and may be modified, suspended, or discontinued at any time at the discretion of our board of directors. The timing and amount of any repurchases under the Repurchase Program will depend upon several factors, including market and business factors. 39 During the three months ended June 30, 2026, we repurchased and immediately retired 0.4 million shares of our Class A common stock for an aggregate amount, including transaction costs, of $20.8 million under the Repurchase Program. As of June 30, 2026, $54.3 million remained available and authorized for repurchases. Asset Acquisition In July 2026, we entered into a definitive purchase and sale agreement to acquire certain real property along with all other improvements, fixtures and leases for a purchase price of approximately $18.3 million. The real property acquired will be used for general corporate purposes. We expect this acquisition to be completed during the fourth quarter of 2026, subject to customary closing conditions. Liquidity As of June 30, 2026, we had $509.6 million in cash and cash equivalents, of which $239.5 million was held outside of regulated insurance entities. We also had restricted cash and cash equivalents of $65.2 million and $517.1 million in marketable securities. Our cash and cash equivalents primarily consist of bank deposits and money market funds. Our marketable securities primarily consist of United States Treasury and agency securities, municipal securities, corporate debt securities, and asset-backed securities. We believe that our existing cash and cash equivalents, marketable securities and cash flow from operations will be sufficient to support short-term working capital and capital expenditure requirements for at least the next 12 months and for the foreseeable future thereafter. This belief is based on management’s current assumptions and is subject to changes in market or regulatory conditions affecting the insurance industry, and other general economic, financial, competitive, and other factors that are beyond our control. Our long-term capital requirements depend on many factors, including our insurance premium growth rate, rate adequacy, level of marketing spend, renewal activity, the timing and the amount of cash received from customers, the performance of our products, including the success of our partnership channel, loss cost trends, the timing and extent of spending to support development efforts, the introduction of new and enhanced products, the continuing market adoption of offerings on our platform, operating costs, and the ongoing uncertainty in global markets. Our debt covenants require us to maintain cash and cash equivalents held with the lender to be at least 25% of the outstanding principal balance of the senior secured term loan. As of June 30, 2026, we maintained $50.0 million of restricted cash and cash equivalents with the lender. Through prudent deployment of capital, we believe we have sufficient resources, and access to additional debt and equity capital, to adequately meet our obligations as they come due. Cash Flows The following table summarizes our cash flow data for the periods presented: Six Months Ended June 30, 2026 2025 (in millions) Net cash provided by operating activities $ 66.8 $ 78.8 Net cash used in investing activities (146.3) (17.6) Net cash used in financing activities (35.6) (19.0) Net cash provided by operating activities for the six months ended June 30, 2026 was $66.8 million compared to $78.8 million for the six months ended June 30, 2025. The decrease in cash provided by operating activities was due to changes in premiums not yet earned, loss and LAE reserves and premiums owed to the fronting carrier due to greater growth in policies in force in the six months ended June 30, 2025, compared to the same period in 2026. This was partially offset by the timing of premium and reinsurance receipts and higher net income between the periods. 40 Net cash used in investing activities for the six months ended June 30, 2026 was $146.3 million compared to $17.6 million for the six months ended June 30, 2025. The increase in cash used in investing activities was primarily due to net purchases of investment grade marketable securities associated with liquidity management and capital requirements for our insurance operations. Net cash used in financing activities for the six months ended June 30, 2026 was $35.6 million compared to $19.0 million for the six months ended June 30, 2025. The increase in cash used in financing activities was primarily due to the prepayment of our Amended Term Loan, partially offset by the net proceeds from issuance of the senior secured term loan to reduce our cost of capital. We also experienced an increase in cash used due to deploying excess capital toward Class A common stock repurchases and retirement. Material Cash Requirements from Contractual and Other Obligations There have been no material changes to our contractual and other obligations from those described in our 2025 10-K, except for the prepayment of the Amended Term Loan and incurrence of debt under the senior secured term loan as discussed further in Note 7, “Long-Term Debt,” in the Notes to Condensed Consolidated Financial Statements - Unaudited. We believe we have sufficient resources, and access to additional debt and equity capital, to adequately meet our obligations as they come due. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity or cash flows. Critical Accounting Estimates Our financial statements are prepared in accordance with GAAP. The preparation of the condensed consolidated financial statements in conformity with GAAP requires our management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the period. We evaluate our significant estimates on an ongoing basis, including, but not limited to, estimates related to reserves for loss and LAE, valuation allowance on our deferred tax assets, and the amount of reinsurance recoverable from reinsurance contracts. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Our critical accounting estimates are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates,” in our 2025 10-K and under the heading “Notes to Condensed Consolidated Financial Statements - Unaudited” appearing in this Quarterly Report on Form 10-Q. During the six months ended June 30, 2026, there were no material changes to our critical accounting estimates from those discussed in our 2025 10-K. 41