Hippo Holdings Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; balance-sheet figures are as of March 31, 2024. Hippo is a property and casualty insurance holding company operating through Services, Insurance-as-a-Service, and Hippo Home Insurance Program (HHIP). Amounts below are in millions unless noted.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Total revenue | $85.1 | $39.8; up 114% |
| Net earned premium | $60.5 | $13.8 |
| Net loss attributable to Hippo | $(35.7) | $(69.8) |
| Net loss per share, basic and diluted | $(1.47) | $(3.01) |
| Adjusted EBITDA loss, non-GAAP | $(19.8) | $(52.1) |
| Gross loss ratio / net loss ratio | 59% / 87% | 76% / 273% |
| Operating cash flow | $17.7 provided | $35.7 used |
Net loss narrowed as revenue increased and operating expenses declined; the company remained loss-making. Gross losses and LAE were $121.1, versus $126.3 a year earlier, while net losses and LAE rose to $52.6 from $37.7 as Hippo retained more risk and its book grew. Total Generated Premium, a company-defined measure of premium placed across its platforms, rose 20% to $293.5; gross written premium was $194.7, up from $189.5.
At quarter-end, cash and cash equivalents were $223.4, restricted cash $39.9, and investments $287.4. Total liabilities were $1,141.5 and stockholders’ equity was $354.8. The filing reports no outstanding FHLB borrowing; available secured borrowing capacity was $11.9. It does not present a conventional consolidated debt balance as a key metric.
Material changes and business developments
- Net earned premium rose substantially as the company retained more premium under its 2023 and 2024 reinsurance arrangements. Ceded written premium declined to $85.9 from $168.2.
- For 2024-effective primary homeowners policies, Hippo elected not to buy proportional reinsurance, retaining more premium and underwriting exposure. It increased catastrophe excess-of-loss protection; the 2024 placement raised the per-occurrence limit by 11% and expanded participating reinsurers from 14 to 19. Management describes protection up to a 1-in-250-year event when specified catastrophe programs are considered together, but says the most severe events remain a risk.
- Total Generated Premium in HHIP declined 29% to $65.5, while HHIP revenue increased to $55.1 from $19.3, principally reflecting higher retained earned premium. HHIP adjusted operating loss improved to $20.2 from $44.3. Insurance-as-a-Service revenue increased 58% to $20.4 and adjusted operating income was $4.7; Services revenue increased 16% to $11.4 and adjusted operating loss narrowed to $5.3.
- Technology and development expense fell 28% to $8.3 and sales and marketing expense fell 36% to $14.4, primarily reflecting lower employee-related costs, headcount and advertising. General and administrative expense declined 8% to $18.3. Impairment and restructuring charges were $3.6, primarily for an abandoned leased office-space right-of-use asset impairment.
Outlook, risks and contingencies
- No quantified revenue, earnings, cash-flow or premium guidance is provided. Management expects HHIP Total Generated Premium to decline in 2024 as it manages exposure, and says pricing and underwriting actions are expected to continue improving results over time.
- Hippo has temporarily paused nationwide underwriting of new HO3 premiums while reassessing risk appetite. Renewal actions include higher wind and hail deductibles, selective non-renewals in high-risk areas and rate increases on catastrophe-exposed properties.
- Insurance results are exposed to catastrophe and weather losses, seasonality, the ability to price risk, and reinsurance availability, cost and collectability. Greater retained risk can increase earned premium but also increases losses and balance-sheet exposure. Regulatory restrictions may limit rate changes, non-renewals or market exits.
- In March 2024, Hippo received inquiries from the California Department of Insurance concerning consumer complaints about compliance with California law in homeowners’ policy non-renewals. The filing does not identify a determined penalty or clear financial estimate.
- A lawsuit involving Hippo, its executive chairman and other parties includes claims and cross-claims related to alleged fraud and contractual matters. Summary-judgment motions were pending, trial was set for September 9, 2024, and potential losses on the plaintiff’s claims could not be estimated.
- Operating cash flow improved partly because of working-capital movements, including a decrease in prepaid reinsurance premiums; it should not be read alone as evidence of sustained operating profitability. Management says additional capital may be needed if revenue and other income do not cover operating and investment needs; future financing availability and terms are not assured.
Most important facts for investors to verify
- Whether lower loss ratios and improved adjusted EBITDA persist, particularly through catastrophe seasons, and how results compare with GAAP net losses.
- How increased risk retention affects net premiums, claims, capital needs and earnings volatility; confirm the scope, cost and limits of catastrophe and other reinsurance protection.
- Whether the HHIP underwriting pause, rate increases and selective non-renewals achieve risk-reduction goals without materially weakening customer retention or premium generation.
- Developments in the California Department of Insurance inquiries and the pending litigation, including any material outcomes or financial exposure.
- Liquidity and cash usage over time, separating recurring operating cash generation from investment maturities and working-capital effects.