Hippo Reports Fourth Quarter 2023 Financial Results
- Revenue increased by 80% YoY to $64 million in Q4 2023.
- Insurance-as-a-Service (IaaS) and Services segments drove Total Gross Profit (TGP) growth, with a 39% and 20% YoY increase, respectively.
- Consolidated TGP rose by 15% YoY, with IaaS and Services now accounting for 77% of Total TGP.
- Hippo Homeowners Insurance Program (HHIP) saw significant improvements in loss ratios, with Q4 Accident Period loss ratio decreasing by 24 percentage points YoY to 64%.
- Operating expenses decreased from 158% of revenue a year ago to 75% in Q4, showcasing substantial operating leverage.
- GAAP net loss attributable to Hippo decreased by 33% YoY to $42 million in Q4 2023.
- Adjusted EBITDA loss decreased by 53% YoY to $22 million in Q4 2023.
- Hippo ended the year with $491 million in cash and investments and a Spinnaker surplus of $191 million.
- The company aims for positive adjusted EBITDA in Q4 2024.
- Conference call and webcast details are available for further information.
- None.
Insights
The reported top-line growth of 15% YoY and the significant 80% increase in revenue to $64 million for Hippo in Q4 is a strong indicator of the company's growing market presence, particularly in the Insurance-as-a-Service (IaaS) and Services sectors. This shift towards IaaS, now representing 77% of Total TGP, suggests a strategic pivot that could be appealing to investors looking for companies innovating within the insurance industry. The improved loss ratios in the Hippo Homeowners Insurance Program (HHIP) also indicate better risk management and could lead to more sustainable profitability.
Moreover, the reduction in GAAP operating expenses from 158% of revenue to 75% demonstrates significant operating leverage, which is crucial for achieving profitability. This is further substantiated by the decreased net loss and adjusted EBITDA loss, signaling a potential turnaround in financial health. The company's year-end cash and investments position of $491 million, along with an increased Spinnaker surplus, provides a cushion that could support future growth or weather economic downturns.
Hippo's focus on proactive home protection and expansion of its consumer agency presents a competitive edge in the evolving insurtech landscape. The growth in TGP (Total Gross Premium) driven by IaaS and Services sectors is indicative of a market trend where customers are seeking more integrated and technology-driven insurance solutions. The company's ability to generate positive adjusted EBITDA in Q4 2024 would be a critical milestone, potentially enhancing investor confidence and possibly affecting the stock's performance.
It is also important to monitor how the mix-shift towards IaaS and Services impacts the traditional insurance business model and whether this could disrupt the sector further. If successful, Hippo could set a precedent for digital transformation in the insurance industry, which may influence peer companies and the market at large.
The substantial improvement in the HHIP Loss Ratio, decreasing by 24 percentage points to 64%, reflects enhanced underwriting discipline and claims management. For a home insurance company like Hippo, managing loss ratios is crucial as it directly affects profitability. The Non-PCS loss ratio improvement is particularly noteworthy as it excludes catastrophic events, offering a clearer view of the company's operational effectiveness.
Furthermore, the increase in Spinnaker's surplus by $26 million YoY represents a stronger reinsurance backing, which is vital for maintaining financial stability and meeting regulatory requirements. This could reassure stakeholders about the company's risk preparedness and financial resilience, especially in the face of potential natural disasters that could result in significant claims.
Complete financial results and full year guidance for 2024 can be found in the company's shareholder letter in the Investor Relations section of Hippo's website at https://investors.hippo.com.
"2023 was a transformational year for Hippo, highlighted by the expanded launch of our consumer agency, the continued growth and success of our Insurance-as-a-Service business, and decisive actions taken to reduce volatility in our Hippo Home Insurance Program," said Hippo President and CEO Rick McCathron. "We enter 2024 poised to go on offense, with streamlined operations ready to serve our core customer segments in our core markets, and with renewed confidence we will generate positive adjusted EBITDA in Q4."
Fourth Quarter Highlights
Favorable Mix-Shift Driving Top-line Growth
- Insurance-as-a-Service (IaaS) and Services driving TGP growth, up
39% and20% YoY, respectively in Q4
Consolidated TGP up15% YoY, with IaaS and Services now representing77% of Total TGP - Revenue up
80% YoY to$64 million
Continued HHIP Loss Ratio Improvement
- Hippo Homeowners Insurance Program (HHIP) Q4 Accident Period loss ratio1 improved 24 percentage points from a year ago to
64% - Hippo Homeowners Insurance Program (HHIP) Q4 Accident Period Non-PCS loss ratio improved 11 percentage points from a year ago to
59%
Generating Substantial Operating Leverage
- GAAP Operating expenses, excluding loss and loss adjustment and insurance related expense, declined from
158% of revenue a year ago to75% in Q4
Net Loss and Adjusted EBITDA continuing to improve
- Q4 GAAP net loss attributable to Hippo of
$42 million 33% from Q4 2022 - Q4 Adjusted EBITDA loss of
$22 million 53% from Q4 2022
Financial Strength
- Year-end Cash and investments of
$491 million - Year-end Spinnaker surplus of
$191 million $165m
Conference Call and Webcast Information
Date: Wednesday March 06, 2024
Time: 8:00 a.m. Eastern Time / 5:00 a.m. Pacific Time
Dial-in: +1 833 470 1428 (
Conf ID: 192971
Webcast: https://events.q4inc.com/attendee/329115828
A replay of the webcast will be made available after the call in the investor relations section of the company's website at https://investors.hippo.com/
Information about Key Operating Metrics/Non-GAAP Financial Measures
We define gross loss ratio expressed as a percentage, as the ratio of the gross losses and loss adjustment expenses, to the gross earned premium. We define TGP as the aggregate written premium placed across all of our business platforms for the period presented. We measure TGP as it reflects the volume of our business irrespective of choices related to how we structure our reinsurance treaties, the amount of risk we retain on our own balance sheet, or the amount of business written in our capacity as an MGA, agency, or as an insurance carrier/reinsurer. We define adjusted EBITDA, a Non-GAAP financial measure, as net loss attributable to Hippo excluding interest expense, income tax expense, depreciation, amortization, stock-based compensation, net investment income, restructuring charges, impairment expense, other non-cash fair market value adjustments, contingent consideration for one of our acquisitions, and other transactions that we consider to be unique in nature. We exclude these items from Adjusted EBITDA because we do not consider them to be directly attributable to our underlying operating performance. This Non-GAAP financial measure is in addition to, and not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with GAAP. Reconciliations of this Non-GAAP financial measure to its most directly comparable GAAP counterpart is included in the shareholder letter referenced above. We believe that these non-GAAP measures of financial results provide useful supplemental information to investors about Hippo.
Forward-looking statements safe harbor
Certain statements included in this press release that are not historical facts are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "should," "would," "plan," "predict," "potential," "seem," "seek," "future," "outlook," and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding estimates and forecasts of financial results and other operating and performance metrics, our business strategy, our cost reduction efforts, the quality of our products and services, and the potential growth of our business. These statements are based on the current expectations of Hippo's management and are not predictions of actual performance. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions, and many actual events and circumstances are beyond the control of Hippo. These forward-looking statements are subject to a number of risks and uncertainties, including our ability to achieve or maintain profitability in the future; our ability to retain and expand our customer base and grow our business, including our builder network; our ability to manage growth effectively; risks relating to Hippo's brand and brand reputation; denial of claims or our failure to accurately and timely pay claims; the effects of intense competition in the segments of the insurance industry in which we operate; the availability and adequacy of reinsurance, including at current coverage, limits or pricing; our ability to underwrite risks accurately and charge competitive yet profitable rates to our customers, and the sufficiency of the analytical models we use to assess and predict exposure to catastrophe losses; risks related to our proprietary technology and our digital platform; outages or interruptions or delays in services provided by our third party providers, including our data vendor; risks related to our intellectual property; the seasonal and cyclical nature of our business; the effects of severe weather events and other natural or man-made catastrophes, including the effects of climate change, global pandemics, and terrorism; continued disruptions from the COVID-19 pandemic; any overall decline in economic activity; the effects of existing or new legal or regulatory requirements on our business, including with respect to maintenance of risk-based capital and financial strength ratings, data privacy and cybersecurity, and the insurance industry generally; and other risks set forth in the sections entitled "Risk Factors" in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. If any of these risks materialize or our assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that Hippo does not presently know, or that Hippo currently believes are immaterial, that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect Hippo's expectations, plans, or forecasts of future events and views as of the date of this press release. Hippo anticipates that subsequent events and developments will cause Hippo's assessments to change. However, while Hippo may elect to update these forward-looking statements at some point in the future, Hippo specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Hippo's assessments of any date subsequent to the date of this press release. Accordingly, undue reliance should not be placed upon the forward-looking statements.
About Hippo
Hippo is protecting the joy of homeownership, helping to safeguard customers' most important financial asset by harnessing the power of real-time data, smart home technology, and a growing suite of home services to deliver proactive home protection.
Hippo Holdings Inc. operating subsidiaries include Hippo Insurance Services, Hippo Home Care, First Connect Insurance Services, Spinnaker Insurance Company, Spinnaker Specialty Insurance Company, and Mainsail Insurance Company. Hippo Insurance Services is a licensed property casualty insurance agent with products underwritten by various affiliated and unaffiliated insurance companies. For more information, including licensing details, visit http://www.hippo.com.
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1 Defined as a percentage, which is the ratio of loss and loss adjustment expenses incurred and attributed to an accident period to the gross earned premium. |
Contacts
Investors:
Sammy Ng
Investors@hippo.com
Press:
Mark Olson
press@hippo.com
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SOURCE Hippo Holdings Inc.
FAQ
What was the revenue growth percentage in Q4 2023 for Hippo (HIPO)?
How did the Insurance-as-a-Service (IaaS) and Services segments contribute to Total Gross Profit (TGP) growth in Q4 2023 for Hippo (HIPO)?
What was the percentage decrease in the GAAP net loss attributable to Hippo in Q4 2023?
What were the year-end cash and investments figures for Hippo (HIPO) in 2023?
What is the company's goal regarding adjusted EBITDA for Q4 2024?
