United States securities and exchange commission logo
October 1, 2020
Alexander Timm
Chief Executive Officer
Root Stockholdings, Inc.
80 E. Rich Street, Suite 500
Columbus, Ohio 43215
Re: Root Stockholdings,
Inc.
Amendment No. 1 to
Draft Registration Statement on Form S-1
Submitted September
17, 2020
CIK No. 0001788882
Dear Mr. Timm:
We have reviewed your amended draft registration statement and
have the following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Amendment No. 1 to Draft Registration Statement on Form S-1
Cover Page
1. We note your disclosure
on page 12 and elsewhere that each share of Class B common
stock has ten votes per
share. Please update the cover page to reflect this voting right.
Prospectus Summary, page 1
2. We note your response
to our prior comment 4 and reissue in part. Please provide support
for the following
statements or revise to make it clear these are management s beliefs:
Traditional methods
of risk assessment are imprecise and not personalized
Systems and
processes are typically old and disconnected from the needs of
consumers
Alexander Timm
FirstName LastNameAlexander Timm
Root Stockholdings, Inc.
Comapany
October NameRoot Stockholdings, Inc.
1, 2020
October
Page 2 1, 2020 Page 2
FirstName LastName
Behavioral data is generally underutilized and agents are the
primary form of
distribution.
3. Please balance the disclosure in your summary, which highlights what
you believe are
your competitive advantages, to discuss the potential challenges you
face as it relates to
your competitive position. In this regard, we note your disclosure on
page 78 that you
are challenged by traditional insurers who have more diverse product
offerings and longer
established operating histories, and that these competitors can mimic
certain aspects of
your digital platform and offerings and can offer customers the
ability to bundle multiple
coverage types together. We also note your disclosure on page 113 that
your competitors
include large national insurance companies, as well as up-and-coming
companies and new
market entrants in the insurtech industry, some of whom also utilize
telematics and offer
forms of usage-based insurance, and that several of these companies
are larger and have
significant competitive advantages over you, including increased name
recognition, higher
financial ratings, greater resources, additional access to capital,
and more types of
insurance coverage to offer.
4. We note your response to our prior comment 7 and reissue in part.
Consistent with your
disclosure on page 106, please disclose on pages 2 and 95 that
adjusting for policies that
do not make it through the underwriting period and rescissions reduces
one and two term
policy retention by 33% and 10%, respectively.
5. We note your response to our prior comment 9 and reissue in part.
Please reconcile your
graphic on page 3 showing that total accident periodloss ratio
declined from 110% in
FY2018 to 100% in FY2019, with your disclosure on page 17 that the
direct loss ratio
increased from 93.6% in FY2018 to 99.9% in FY2019, or advise.
The COVID-19 pandemic has caused disruption to our operations, page 20
6. We note your response to our prior comment 12 and reissue in part.
Please revise to
describe in greater detail whether and to what extent you have been
impacted by
the various mandates and requests of state regulators in response to
COVID-19.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Capital Management, page 72
7. We acknowledge your response to prior comment 16 and your revised
disclosure on page
73 as well as that on page 112. Please tell us the nature of your
insurance-linked security
used in your capital management and reinsurance strategies effective
July 1, 2020 and
why you believe that it is innovative. In your response tell us:
The type of security (e.g., a bond not repayable if some insurance
event occurs or
does not occur, catastrophe bond, etc.);
The significant provisions of this security;
How you intend to account for this security including reference to
the authoritative
literature you rely upon to support your intended accounting; and
Whether this security is a material contract under Item 601(b)(10)
of Regulation S-K
Alexander Timm
FirstName LastNameAlexander Timm
Root Stockholdings, Inc.
Comapany
October NameRoot Stockholdings, Inc.
1, 2020
October
Page 3 1, 2020 Page 3
FirstName LastName
and explain why or why not.
Key Performance Indicators, page 73
8. We note your response to prior comment 17. Please revise to disclose
your reasons for
providing direct written and direct earned premiums consistent with
your response.
Critical Accounting Policies and Estimates
Reinsurance, page 92
9. We note your response to prior comment 36. Please revise your
reinsurance disclosure
further to quantify and explain the significant 2019 increases in your
provisions for each
feature, and their resulting impacts to your financial statements and
liquidity.
Our Products, page 107
10. We note your response to our prior comment 3. Please disclose the
material terms of
the acquisition agreement and file the agreement as an exhibit or tell
us why you believe
that is not required.
Description of Capital Stock
Voting Rights, page 141
11. Please disclose the percentage of outstanding shares that Class B
shareholders must
maintain to continue to control the outcome of matters submitted to
shareholders for
approval.
Conversion, page 142
12. We note your disclosure regarding conversion of the Class B common
stock. Please
describe the dilutive impact of such conversion upon the outstanding
shares of Class A
common stock.
Notes to the Consolidated Financial Statements
Note 5: Loss and Loss Adjustment Expense Reserves, page F-17
13. We acknowledge your response to prior comment 35. Please tell us how
your current
presentation of your loss development table on page F-18 complies with
the guidance in
ASC 944-40-50-4B to present only losses and allocated loss adjustment
expenses (LAE).
In this regard, for example, it appears that your 2019 accident year
incurred amount
presented in the table of $295.0 million is composed of $177.0 million
in claims paid and
$118.0 million in unpaid claims as of December 31, 2019. As the $17.6
million in
unallocated LAE identified in your response only relates to your paid
claims and you
indicate essentially that your reserving approach includes both
allocated and unallocated
LAE, it appears that the $118.0 million in unpaid claims included in
the incurred portion
of your table includes unallocated LAE and is therefore inconsistent
with the referenced
Alexander Timm
Root Stockholdings, Inc.
October 1, 2020
Page 4
guidance.
You may contact Bonnie Baynes at (202) 551-4924 or Mark Brunhofer at
(202) 551-
3638 if you have questions regarding comments on the financial statements and
related
matters. Please contact John Stickel at (202) 551-3324 or Justin Dobbie at
(202) 551-3469 with
any other questions.
FirstName LastNameAlexander Timm Sincerely,
Comapany NameRoot Stockholdings, Inc.
Division of
Corporation Finance
October 1, 2020 Page 4 Office of Finance
FirstName LastName
