Hippo Holdings Inc. — FY2023 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2023, compared with FY2022. This is an annual filing; the provided filing text does not provide a clear standalone fourth-quarter income statement or Q4-specific results.
Business context
Hippo is a U.S.-focused insurance holding company operating through Services (agency and platform fees), Insurance-as-a-Service (capacity for third-party MGAs through Spinnaker), and the Hippo Home Insurance Program (Hippo-branded homeowners insurance). Services generally earns fees and commissions without underwriting risk; the insurance businesses retain varying levels of risk and use reinsurance.
Financial and operating performance
| Metric | FY2023 | FY2022 |
|---|---|---|
| Total revenue | $209.7 million | $119.7 million |
| Net loss attributable to Hippo | $(273.1) million | $(333.4) million |
| Adjusted EBITDA loss (non-GAAP) | $(200.6) million | $(206.4) million |
| Total Generated Premium (non-GAAP operating metric) | $1,134.3 million | $811.1 million |
| Gross loss ratio | 71% | 76% |
| Net loss ratio | 169% | 239% |
| Cash used in operating activities | $92.4 million | $161.5 million |
Revenue increased 75%, while the attributable net loss narrowed 18%. Total Generated Premium grew 40%, driven by non-Hippo written premium, agency growth, premium retention, and rate increases. Net earned premium rose to $107.5 million from $42.5 million, reflecting business growth and higher premium retention. Net investment income increased to $23.1 million from $9.0 million, largely due to higher yields.
Losses and loss adjustment expenses rose 79% to $181.7 million, alongside growth in the book and higher retention of risk. The gross loss ratio excluding prior-year reserve releases was 74%, versus 93% in FY2022. The Hippo Home Insurance Program gross loss ratio was 101%, versus 83%; excluding reserve releases, it was 103% versus 107%, with higher catastrophe losses offset by improved non-catastrophe performance.
Segment results: Services revenue was $44.3 million and adjusted operating loss was $37.6 million; Insurance-as-a-Service revenue was $70.7 million and adjusted operating income was $18.3 million; Hippo Home Insurance Program revenue was $102.1 million and adjusted operating loss was $180.3 million. Segment measures are management-defined and do not equal GAAP net income.
Balance sheet, liquidity, and material changes
- At December 31, 2023, cash and cash equivalents were $142.1 million, restricted cash was $53.0 million, and investments were $348.8 million. Restricted cash includes fiduciary and collateral amounts and is not all freely available.
- Total assets were $1,524.7 million; total liabilities were $1,140.0 million; total stockholders’ equity was $384.7 million. The balance sheet does not show a conventional debt balance. Hippo had $17.4 million of available FHLB borrowing capacity and no amount outstanding under that facility.
- Operating cash use improved to $92.4 million from $161.5 million. Cash, cash equivalents, and restricted cash ended the year at $195.1 million, down from $244.5 million.
- Following significant second-quarter 2023 catastrophe losses, Hippo raised rates on some renewals, increased wind and hail deductibles, selectively non-renewed policies in certain areas, and paused nationwide new HO3 underwriting while reassessing risk appetite. It also began a company-wide expense-reduction effort, including staff reductions.
- FY2023 gross written premium was $847.3 million, of which $687.7 million was ceded; net written premium was $159.6 million. Net retention and loss participation features increased the company’s exposure to underwriting results.
Outlook, risks, contingencies, and unusual items
- Management says pricing and underwriting actions should continue to improve non-catastrophe loss performance over time. Near-term customer growth is focused on the agency business, third-party policies, and home-care offerings, with a strategic return to Hippo-underwritten policies contemplated as underwriting actions take hold. The filing provides no specific numerical earnings or revenue guidance.
- For the Hippo primary homeowners program beginning in 2024, the company elected not to buy proportional reinsurance and will retain more premium and risk; it also cut off 25% participation on its 2023 treaty effective January 1, 2024. Builder-channel business is expected to retain approximately 85% of premium before catastrophe protection. Management warns this could increase losses and required statutory capital.
- Catastrophe exposure, weather concentration, reserve estimation, reinsurance availability and collectability, pricing and regulatory constraints, customer retention, and access to capital are principal risks. Gross unpaid loss and LAE reserves were $322.5 million, including $217.2 million of IBNR; a 10% increase in ultimate losses would raise net reserves by an estimated $14.0 million.
- A California civil action brought by Eyal Navon includes multiple claims against Hippo and its co-founder, as well as cross-claims. Hippo denies the allegations; trial was expected in September 2024, and the filing says potential losses cannot be estimated.
- FY2023 impairment and restructuring charges were $5.5 million, including $2.6 million in workforce-related costs and $2.9 million for an abandoned lease asset. FY2022 included a $53.5 million goodwill impairment. FY2023 also included $2.0 million of favorable prior-year loss reserve development and a $1.3 million gain from remeasuring a previously held interest in acquired agencies.
- Hippo reported a $50 million share repurchase authorization; $1.8 million was repurchased in FY2023 and $48.2 million remained authorized at year-end. The company does not expect to pay cash dividends in the foreseeable future.
- The financial statements received an unqualified audit opinion. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not attest to internal controls because Hippo qualified as an emerging growth company.
Investor facts to verify
- Whether the 2024 move to retain substantially more homeowners risk produces sustainable underwriting improvement without materially increasing catastrophe losses or capital needs.
- Reserve adequacy and reinsurance recoverable quality, including the impact of loss participation provisions and catastrophe claims development.
- Cash burn, unrestricted liquidity, and the company’s funding needs if losses persist or reinsurance costs rise.
- Progress in reducing the Hippo Home Insurance Program’s loss ratio and the effects of the HO3 pause, rate increases, and selective non-renewals on retention and revenue.
- Developments in the Navon litigation and any other material regulatory, legal, or claims contingencies.
- Non-GAAP measures, including Adjusted EBITDA and Total Generated Premium, alongside GAAP results; neither is a substitute for GAAP profitability or cash flow.