Root, Inc. 2Q 2022 Letter to Shareholders

Letter to Shareholders: Q2 2022

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Key quarterly metrics:

Gross written premium ($M)

Gross earned premium ($M)

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Letter to Shareholders: Q2 2022

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Dear Root Shareholders:

The last 12 months have been one of the most difficult periods for auto insurers in decades. Prolonged inflation driving rapidly rising loss costs, challenging capital markets, and the macro environment in general have informed the way we approach the market and think about capital deployment today. Over the last year, Root has executed on our playbook of taking proactive steps to improve performance and conserve cash including:

• Reducing marketing spend 77% to $25.4 million in Q2'22 compared with Q2'21
• Slowing new business, resulting in gross written premium contraction of 21% from Q2'21 to Q2'22
• Leveraging our proprietary tech stack and rating engine to implement 35 filings year-to-date with an average rate increase of 28% on top of the 42 filings implemented at an average increase of 14% in 2021
• Filed revised contracts in 23 states in H1'22 to tighten underwriting and reduce premium leakage
• Reducing headcount to reflect the current needs of the business while taking additional actions to reduce run-rate expenses by $48 million annually from peak 2021 levels

Collectively, these actions have:

• Reduced operating cash buby over $120 million compared with H1'21
• Improved operating loss 53% and adjusted EBITDA 59% when compared with Q2'21
• Resulted in a five-point reduction in gross accident period loss ratio from Q2'21 to Q2'22
• Lowered non loss and loss adjustment expense (LAE) expenses by 57% from Q2'21 to Q2'22

While we are working to strengthen the financial foundation of the company, we are focused on deepening our competitive advantage through our investment in technology. Version 2 (V2) of our fully embedded Carvana product is now live, creating a product that works better for customers by allowing them to purchase insurance coverage in as few as three clicks without leaving the Carvana environment. Our technology and embedded capabilities have caught the attention of prospective partners and continue to drive further discussions.

New premium volume from Carvana grew to 31% of new business in Q2'22, prior to the launch of V2 in July. By designing a differentiated customer experience, we expect to improve our attach rate over time. In addition, we entered our 33rd and 34th states in Alabama and Florida, giving coverage for Carvana customers over a broader geographic footprint.

Looking ahead, we will continue to execute on our pricing and underwriting improvements through the back half of 2022. We expect to drive improvements to our financial results while expanding and deepening our embedded product experience.

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Letter to Shareholders: Q2 2022

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Q2 2022 highlights:

All figures are compared to Q2 2021 unless otherwise stated.

• Gross written premium decreased 21% to $140 million
• Gross earned premium decreased 5% to $171 million

Gross earned premium by seasoned versus

unseasoned

60%

• Renewal premium % of gross earned premiums increased to 75%.

Renewal premium % of gross earned premium

• Accident period severity increased 6% and frequency increased 1%
• Gross profit increased by $11 million to $(8) million

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Letter to Shareholders: Q2 2022

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Pricing and Underwriting

We are executing on our plan to improve operating results through pricing and underwriting. By combining data science and technology with traditional underwriting, we have demonstrated year-over-year improvement in our loss ratio despite historic-level trend. The construction of our tech stack allows us to respond to current trends and implement rate changes quickly. Our gross accident period loss ratio was 85%, a five-point improvement over the 90% in Q2'21. The improvement reflects a combination of rate increases earning in and mix of business, with a higher weighting of renewal premiums. Seasonality typically makes the second quarter a peak loss ratio quarter, which, in addition to continued inflationary pressures, is reflected in the four-pointsequential-quarter increase. Year-to-date, we have implemented 35 rate increases with an average rate increase of roughly 28%.

Gross accident period loss ratio

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