Hippo Holdings Inc. Q1 FY2025 earnings call

Key Points

• Proactively supported customers after Los Angeles wildfires.
• HHIP gross written premium from homebuilder partners up 35% y-o-y; reducing HHIP written premium from existing homes in cat-prone areas largely complete, preparing to expand new business in HHIP.
• Written premium outside of HHIP up 21% y-o-y; other lines of business are a diversification source, additive to underwriting profit and lowering volatility.
• Raised $50 million surplus note to support Spinnaker platform growth, with an approximate 9.5% rate.
• Reduced fixed expenses through investments in infrastructure and automation, gaining operating leverage.

In Q1 2025, Hippo's revenue was $110 million. The Hippo Homeowner's Insurance Program (HHIP) had revenue of $62 million, a 12% year-over-year increase, accounting for approximately 56.36% of total revenue. Insurance-as-a-service revenue was $39 million, a 91% year-over-year increase, making up about 35.45% of total revenue. Written premium outside of HHIP increased 21% year-over-year. The HHIP gross written premium from homebuilder partners saw a 35% year-over-year increase.

Forward-Looking Statements

• Expect key financial metrics to continue improving y-o-y and q-o-q.
• Guide for full year 2025 revenue between $465 million to $475 million, adjusted EBITDA loss between $35 and $39 million, net loss between $65 and $69 million.
• Aim to generate net profit by Q4 2025 with annual run rate of more than $500 million of revenue.
• HHIP non-PCS loss ratio to improve throughout the year; HHIP PCS cat loss ratio to follow seasonal pattern peaking in Q2 and trending lower.
• Fixed expenses to be consistent with Q1 dollar levels as top line grows, enabling continued operating leverage.

Risks

• Forward-looking statements subject to risks, uncertainties, and factors causing actual results to differ from forecasts, as detailed in Hippo’s SEC filings.
• Impact of catastrophic events like Los Angeles wildfires on financial results.
• Regulatory approval needed for raising $50 million surplus note may pose challenges.

Q: With regard to the surplus note being raised, what would be the cost of that note?

A: The rate that we are getting on this is approximately 9.5%.

Q: You mentioned that the capital will be used to fund the growth. In Spinnaker, I'm just wondering if the HHIP program or the funding business or both, can you talk about the decision to tap into the surplus note versus contributing cash from the holding company?

A: The primary driver on the desire to raise the note is to fund the Spinnaker side of our business and the Spinnaker platform, both as a combination of necessary surplus to maintain our AMS rating, but also for risk participation in the programs we choose to participate in.

Q: Can you talk about how you're thinking about tariffs, whether it be on material inflation or just kind of new home sales?

A: When we think about homeowners insurance specifically, the cost built into replacing homes in the event of total loss are built into the coverage A and premium charged for those. Our ability to raise coverage A and the commensurate premium is automatic at each policy's renewal. Those changes do not require regulatory approval.

Q: How are we thinking about kind of getting to EBITDA profitability?

A: The $45 million number includes the FAIR plan assessment. We have baked into our numbers the entire assessment, our belief of the entire assessment. But we have not baked into the numbers any recoupment we get from policyholders. So we're fully loading it and not taking a discount of any potential recoupment. We do expect some benefit in the future to that number, because we have the ability to charge back some of the FAIR plan costs back to the policyholders. For accounting reasons, we cannot include this amount right now, but it will give us some benefit to that amount in the future.