“Right now, Hippo is not profitable as a business, and that is primarily, as we've discussed on previous calls, because we're still working on improving the loss ratio,” Ellis told analysts during the carrier’s conference call.
Hippo’s Q4 gross loss ratio improved 47 points to 42%, as favorable reserve development from prior and current years offset cat losses driven by Winter Storm Elliott.
In 2023, the InsurTech is targeting rate increases in the high teens – a similar level to 2022 – by implementing 73 filings in 31 states, among which 85% had already been submitted to insurance authorities.
In comparison, Hippo achieved a 20% written rate increase through 64 filings in 28 states in 2022.
“These filings will also significantly impact 2023, but we'll continue to see the compounding effect of the last two years of rate, earning in through 2024 and see that impact significantly [on the] loss ratio [and] loss results that we see going forward,” CUO Chris Donahue told analysts.
In its earnings report, the InsurTech disclosed that its Q4 adjusted Ebitda figure totaled negative $47.3mn, compared to negative $46mn in the prior year quarter. It expects to turn Ebitda positive by the end of 2024 with cash of at least $400mn, according to company documents.
During its investor day in September, Hippo outlined plans to reach positive Ebitda of $20mn-$30mn by 2025, compared to a loss of approximately $200mn for 2022.
InsurTech leaders are under pressure to prove underwriting proficiency, after years of focusing on proving growth to boost valuation and attract investors.
Hippo’s stock has plunged 62% over the past year and over 90% since the company began trading publicly in August 2021 following a de-SPAC transaction.
Consensus: Hippo missed analyst expectations as adjusted diluted earnings per share came in at a loss of $2.74, compared to an expected loss of $2.63 per share.
Loss ratio: The gross loss ratio fell 47 points to 42% year-over-year. The net loss ratio rose six points YoY to 222%.
Favorable reserve releases from prior accident years benefitted the gross loss ratio by 10 points.
Hippo reported two points of benefit from cat losses in the quarter. The quarter’s cat losses, largely from Winter Storm Elliot, were offset by current year favorable development from the InsurTech’s initial loss pick from Hurricane Ian.
Premiums: Gross written premiums were up 47.3% to $177.7mn. Gross placed premium increased 34% to $56.3mn.
Profits: Hippo’s net loss totaled $63.1mn, compared to a loss of $60.7mn in the prior-year quarter.
Guidance: Looking forward, the company projected 21% year on year growth for total generated premium to $984mn, 43% revenue growth to $172mn and adjusted Ebitda of negative $147mn for full year 2023.
Commentary: "We have a lot going on at Hippo but as we look out to 2023, there are a few key areas of focus for our company. First, we're developing our agency to ensure that all of our customers have a superior Hippo experience, whether they buy a Hippo Home Insurance policy (underwritten and serviced by Hippo) or one of our third-party offerings,” said president and CEO Richard McCathron.
“Second, we expect our loss ratio which has already shown much progress will show much more as the actions we’ve taken and are in the process of implementing work their way into the results. Third, we will be investing in our Hippo Home Care business which we believe will become a key differentiator of our customer experience in the years to come.
“At the beginning of my first full calendar year as Hippo’s CEO, I could not be more excited about our vision and the progress we made toward making it a reality during 2022. And the most exciting part is that for both our customers and our shareholders, the best is yet to come. Thank you for your support and for joining us on this journey.”
