Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hippo Holdings Inc (HIPO, Financial) reported a significant year-over-year improvement in its HHIP non-weather loss ratio, marking the best performance in this metric to date.
- The company expanded its home builder access program in key states like California, Florida, and Texas, expecting to provide insurance access for nearly 50,000 new homes annually.
- Hippo Holdings Inc (HIPO) achieved a 21% year-over-year growth in total generated premium (TGP), reaching $368 million.
- The company successfully sold a majority stake in its independent agent platform, First Connect Insurance Services, for approximately $48 million, strengthening its cash position.
- Hippo Holdings Inc (HIPO) reported a substantial improvement in its net loss, reducing it by 84% compared to Q3 2023, driven by better operating leverage and improved loss ratios.
Negative Points
- The TGP in Hippo's home insurance program segment declined by 18% due to managing exposure to high catastrophe geographies.
- Despite improvements, the HHIP net loss ratio remains high at 84%, indicating ongoing challenges in achieving profitability.
- The sale of First Connect is expected to lower Q4 TGP by approximately $50 to $60 million, impacting revenue.
- The company still faces headwinds from legacy portfolio issues, which may continue to affect financial performance in the short term.
- Hippo Holdings Inc (HIPO) experienced a decline in its services segment revenue growth due to a mix shift from agency commissions to the First Connect platform.
Q & A Highlights
Q: Can you provide an equivalent nationwide number for the new homes you can service annually, given your expansion in California, Florida, and Texas?
A: We have access to approximately 200,000 new homes with our existing partners. The addressable market is anticipated to be closer to 1.5 million homes in 2025. - Richard McCathron, President and CEO
Q: Do you have any data on how the loss ratio looks as insured homes roll off the builders' warranties?
A: We see a very high retention rate and favorable loss ratios for new homes, which generally perform better than older homes. As homes age, they transition to more traditional homeowners policies. - Richard McCathron, President and CEO and Stewart Ellis, CFO
Q: What impact does the sale of the First Connect stake have on EBITDA?
A: The sale has a small positive impact on EBITDA as First Connect was not yet profitable on an operating income basis. This allows First Connect to increase its investment for future growth. - Stewart Ellis, CFO
Q: Why did you sell the shell part of the business under Spinnaker?
A: It was a dormant asset, and we had a partner interested in acquiring it. Selling it was a way to monetize an unused asset. - Richard McCathron, President and CEO
Q: Are you planning to grow the HHIP program into 2025?
A: Our priority is to remediate the legacy portfolio, but we are writing new business in areas with a high likelihood of positive expected loss ratios, particularly in the new builder channel. - Richard McCathron, President and CEO
Q: Will share buybacks be a recurring part of your strategy going forward?
A: We will continue to explore opportunistic share repurchases when it is in the best interest of our shareholders, especially as we approach profitability. - Stewart Ellis, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
