LONG-TERM DEBT |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LONG-TERM DEBT | LONG-TERM DEBT In October 2024, we entered into a $200.0 million six-year term loan, or Amended Term Loan, with the principal amount due and payable upon maturity on October 29, 2030. Interest was payable quarterly and determined on a floating interest rate calculated on the Secured Overnight Financing Rate, or SOFR, with a 1.0% floor, plus an applicable margin ranging from 5.25% to 6.00% based upon the debt-to-capital ratio payable quarterly. In May 2026, we prepaid all of the outstanding principal balance of the Amended Term Loan with borrowings under a new senior secured term loan described below. 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. In May 2026, we obtained a $200.0 million senior secured term loan that matures in May 2029. We incurred $2.3 million of debt discount and issuance costs related to the senior secured term loan, which were capitalized and will be amortized over the duration of the senior secured term loan. 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. The senior secured term loan requires us to maintain cash and cash equivalents held with the lender to be at least 25.0% of the outstanding principal balance at all times. As of June 30, 2026, we maintained $50.0 million of cash and cash equivalents with the lender, which we have recorded within restricted cash and cash equivalents on our condensed consolidated balance sheets. The senior secured term loan also contains debt covenants that commence with the three months ending September 30, 2026, and are measured at the end of each fiscal quarter. These covenants require mandatory minimum thresholds on our consolidated net worth, debt service coverage, and regulated subsidiary equity. We are also required to maintain a minimum risk-based capital ratio on our domestic insurance subsidiaries. Additionally, the agreement includes a maximum debt-to-capital ratio, which includes scheduled step-downs over the duration of the senior secured term loan. The senior secured term loan is secured by assets of Root, Inc. and those of our wholly-owned subsidiary loan parties. In addition, we have pledged 100% of the capital stock of our subsidiaries. The following summarizes the carrying value of long-term debt as of June 30, 2026 and December 31, 2025:
The required principal payments on long-term debt as of June 30, 2026 are as follows:
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