Hippo Q1 2025 Earnings Report

Hippo EPS Results

• Actual EPS: -$1.91
• Consensus EPS: -$1.41
• Beat/Miss: Missed by -$0.50
• One Year Ago EPS: N/A

Hippo Revenue Results

• Actual Revenue: $110.30 million
• Expected Revenue: $106.70 million
• Beat/Miss: Beat by +$3.60 million
• YoY Revenue Growth: N/A

Hippo Announcement Details

• Quarter: Q1 2025
• Date: 5/7/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, May 7, 2025
• Conference Call Time: 5:00PM ET

Hippo (NYSE:HIPO) provides property and casualty insurance products to individuals and business customers primarily in the United States. The company operates through three segments: Services, Insurance-as-a-Service, and Hippo Home Insurance Program. Its insurance products include homeowners' insurance against risks of fire, wind, and theft, as well as other personal lines policies from third party carriers; and personal and commercial, as well as home, auto, cyber, small business, life, specialty lines, and other insurance products. The company distributes insurance products and services through its technology platform and website, as well as operates licensed insurance agencies. Hippo Holdings Inc. is headquartered in Palo Alto, California.

Hippo Q1 2025 Earnings Call Transcript

Key Takeaways

• Q1 results included $45 million impact from the Los Angeles wildfires; excluding this, net loss and adjusted EBITDA improved by ~$33 million and ~$24 million year-over-year, and Hippo remains on track for net profit by Q4 2025.
• HHIP gross written premium from new-homebuilder partners rose 35% year-over-year, with risk-reduction actions in cat-prone existing homes now largely complete and a planned expansion to be detailed at Investor Day.
• Premiums outside HHIP grew 21% year-over-year via the Spinnaker platform, which delivers consistent underwriting profit; Hippo agreed to raise a $50 million surplus note at ~9.5% to fund further diversification without equity dilution.
• Operating leverage improved as Q1 sales, marketing, technology and G&A expenses fell 18% in absolute terms and to 30% of revenue from 48% a year ago, driven by infrastructure and automation investments.
• Full-year 2025 guidance forecasts $465–475 million revenue, adjusted EBITDA loss of $35–39 million, net loss of $65–69 million, and an annualized revenue run rate above $500 million with profitability in Q4 2025.

Presentation

[Operator]

Good afternoon. Thank you for attending the Hippo First Quarter twenty twenty five Holdings Call. My name is Cameron, and I'll be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. And I would now like to pass the conference over to your host, Mark Olson, Director of Communications. You may proceed.

[Mark Olson, Director of Corporate Communications at Hippo]

Thank you, operator. Good afternoon and thank you for joining Hippo's twenty twenty five first quarter earnings call. Earlier today, Hippo issued a shareholder letter announcing its Q1 twenty twenty five results, which is available at investors.hippo.com. Leading today's discussion will be Hippo President and Chief Executive Officer, Rick McAatherine Chief Financial Officer, Guy Zeltzer and Stuart Ellis, Chief Strategy Officer. Following management's prepared remarks, we will open up the call to questions.

[Mark Olson, Director of Corporate Communications at Hippo]

Before we begin, we'd like to remind you that our discussion will contain predictions, expectations, forward looking statements and other information about our business that are based on management's current expectations as of the date of this presentation. Forward looking statements include, but are not limited to, Hippo's expectations or predictions of financial and business performance and conditions and competitive and industry outlook. Forward looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from historical results and or from our forecast, including those set forth in Hippo's Form 10 Q filed today. For more information, please refer to the risks, uncertainties and other factors discussed in Hippo's SEC filings, in particular in the section entitled Risk Factors in our Form 10 Q. All cautionary statements are applicable to any forward looking statements we make whenever they appear.

[Mark Olson, Director of Corporate Communications at Hippo]

You should carefully consider the risks and uncertainties and other factors discussed in Hippo's SEC filings. Do not place undue reliance on forward looking statements as Hippo is under no obligation and expressly disclaims any responsibility for updating, offering or otherwise revising any forward looking statements, whether as a result of new information, future events or otherwise, except as required by law. During this conference call, we will also refer to non GAAP financial measures such as adjusted EBITDA. Our GAAP results and description of our non GAAP financial measures with full reconciliation to GAAP can be found in the first quarter twenty twenty five shareholder letter, which has been furnished to the SEC and is available on our website. And with that, I'll turn the call over to Rick McAthron, our President and CEO.

[Richard McCathron, President, CEO & Director at Hippo]

Thanks, Mark, and good afternoon, everyone. Thank you for joining us. During Q1, we delivered on two of our most important objectives as a company. We proactively supported our customers in the aftermath of the Los Angeles wildfires as we do in all catastrophic events and further advanced the key drivers of long term value in our business. As we discussed last quarter, HIPAA's financial results were impacted by the fires in Los Angeles that affected the broader homeowners insurance industry.

[Richard McCathron, President, CEO & Director at Hippo]

However, when we look beyond the short term impact of these fires, our Q1 results reveal remarkable progress in our business and we remain on track to generate net profit by the end of the year. Our Hippo homeowners insurance program saw a 35% year over year increase in gross written premium from our homebuilder partners. New homes are built to modern codes, making them more resilient and better equipped to withstand catastrophic events, which is why this channel has had such compelling underwriting results. These homes, which have accounted for most of the new business we have been writing in California over the past few years, were not impacted by the fires. We continue to reduce HHIP written premium from existing homes in cat prone areas versus prior year to help reduce weather related volatility in the portfolio.

[Richard McCathron, President, CEO & Director at Hippo]

And I'm happy to report that these efforts are now largely complete. With greater confidence in our geographic footprint, rate adequacy and improved deductible structure, we are now preparing to expand new business in this program. We will share more detail about the plans for growth in HHIP at next month's Investor Day. Written premium outside of HHIP increased 21% year over year. We view these other lines of business, which are available to us because of the quality of our Spinnaker platform as an important source of diversification going forward.

[Richard McCathron, President, CEO & Director at Hippo]

They are additive to our underwriting profit while lowering the volatility of that profit, a true win win. Spinnaker has proven its ability to build relationships with quality underwriters over the past ten years and the consistent profitability of this portion of our business is a testament to its value. We believe so strongly in the value of this platform that we decided to raise additional risk based capital to further support its growth and signed an agreement to raise a $50,000,000 surplus note in April pending regulatory approval. This incremental capital will support further growth in these diversifying product lines without diluting our consolidated equity base, another win win. Finally, we continue to gain operating leverage during the quarter by reducing fixed expenses through further investments in our infrastructure and automation while boosting our top line revenue.

[Richard McCathron, President, CEO & Director at Hippo]

These investments will support continued operating leverage improvements in future quarters. I'm extremely proud of the progress we made this quarter and excited to share our three year roadmap and long term financial targets at our upcoming Investor Day on 06/12/2025 in New York City. The team's hard work preparing the company for sustainable growth positions us well for continued and accelerated success in 2025 and beyond. Now I'd like to turn the call over to our Chief Financial Officer, Guy Zeltzer, to walk through the highlights of our first quarter twenty twenty five financial results as well as our expectations for the remainder of 2025.

[Guy Zeltser, CFO at Hippo]

Thanks Rick and good afternoon everyone. In the first quarter of twenty twenty five, we achieved a meaningful improvement in all the main underlying drivers of value in our business versus a year ago. We drove solid premium revenue growth, diversified our premium base, improved the attritional gross loss ratio and continue to demonstrate our scalability through additional fixed cost leverage. The only drag on our Q1 results were the Los Angeles wildfires, but as Rick mentioned, none of these losses were related to our new homes channel, which has represented a substantial majority of the new business we have been writing in California over the past few years. Looking ahead to the rest of 2025, we expect our key financial metrics to continue to improve both year over year and quarter over quarter and we're now guiding to finish 2025 at an annual run rate of more than 500,000,000 of revenue and generating net profit.

[Guy Zeltser, CFO at Hippo]

In Q1, revenue grew 30% year over year to $110,000,000 up from $85,000,000 in Q1 of last year. The growth was driven primarily by our Insurance as a Service and HEPO Home Insurance Program segments. Insurance as a Service revenue grew 91% year over year to $39,000,000 up from $20,000,000 in Q1 of last year. This was driven by a 27% year over year growth in gross earned premium, which was achieved through strength in existing programs as well as higher risk retention at select programs where the risk profile and underwriting profitability were attractive. HHIP revenue grew 12% year over year to $62,000,000 up from $55,000,000 in Q1 of last year.

[Guy Zeltser, CFO at Hippo]

This was driven by improvements to our reinsurance structure, which raised net earned premium as a percentage of gross earned premium to 85% in Q1, up from 58% a year ago. Over the course of 2025, this year over year comparison will become a smaller factor in our financials as the prior year period converged to current levels. The HJP revenue growth was offset by a 20% year over year reduction in gross earned premium, driven by the final stages of our efforts to reduce exposure in cap run areas for non new homes, which was offset by growth in earned premium from our new homes channel. In Q1, the HHIP gross loss ratio increased 41 percentage points year over year to 121%. This increase was primarily the result of the white virus in Los Angeles, which by themselves resulted in a 56 percentage points year over year increase in the HHIP gross loss ratio.

[Guy Zeltser, CFO at Hippo]

The impact of the fires was offset by an improvement in our HHIP non PCS loss ratio, which declined six percentage points year over year to 53%, driven by the portfolio transformation we underwent in 2024, which included rate increases, structural changes to our coverages and other underwriting actions. The HJP net loss ratio increased 33 percentage points year over year to 133%. Again, this increase was primarily the result of the wildfires in Los Angeles, which by themselves resulted in a 57 percentage points year over year increase in the HHIP net loss ratio. In Q1, we continue to deliver top line growth while reducing our operating expenses as a percentage of revenue and on an absolute dollar basis. Relative to Q1 of last year, our sales and marketing, technology and development and general and administrative expenses collectively declined by $7,000,000 a year over year decrease of 18%.

[Guy Zeltser, CFO at Hippo]

When combined with the increases in our revenue over the same period, these costs fell from 48% of revenue in Q1 of last year to 30% of revenue this quarter. Q1 net loss came in at $48,000,000 a $12,000,000 increase versus Q1 of last year with $45,000,000 of expense related to the LA wildfires. Without the impact of the LA wildfires, our net loss would have improved by $33,000,000 year over year. This underlying improvement was supported by top line growth due to higher premium retention at Insurance as a Service and HHIP, attrition and loss ratio improvement due to pricing and underwriting actions taken in 2024, lower fixed expenses due to continued progress driving operational efficiencies and restructuring expenses we incurred in Q1 of last year that did not reoccur this year. Our Q1 adjusted EBITDA loss came in at $41,000,000 a $21,000,000 increase versus Q1 of last year with $45,000,000 of expense related to the LA wildfires.

[Guy Zeltser, CFO at Hippo]

Without the impact of the LA wildfires, our adjusted EBITDA would have improved by $24,000,000 year over year. The same drivers of the net loss improvement also benefited adjusted EBITDA, except for the effect related to last year's restructuring expenses, which does not impact adjusted EBITDA. Q1 ending cash and investments decreased quarter over quarter by $42,000,000 to $528,000,000 This decrease was driven primarily by payment of losses related to the LA fires and seasonal working capital changes associated with payments to reinsurers. On 04/30/2025, Spinnaker Insurance Company, a wholly owned subsidiary of Fipo entered into an agreement to issue a surplus note in the aggregate principal amount of $50,000,000 to several initial purchases. The closing of the transaction is subject to the approval of the Illinois Department of Insurance.

[Guy Zeltser, CFO at Hippo]

As of today, approval has not been obtained and no proceeds have been received under the agreement. In Q1, we made significant progress in the key drivers of long term value in our business. We can therefore reiterate our previous guidance that we will generate net profit by the fourth quarter of twenty twenty five. The key assumptions behind our guidance are revenue growth driven by higher premium volume coupled with higher premium retention in our risk businesses. HHIP non PCS loss ratio improving throughout the year as underwriting and pricing actions, which have already been implemented, continue to work their way into our financials.

[Guy Zeltser, CFO at Hippo]

HEJP PCS cap loss ratio to follow the seasonal pattern where it peaks in Q2 and trends lower throughout the remainder of the year. Fixed expenses to be consistent with Q1 dollar levels, even as our top line continues to grow enabled by the scalability of our infrastructure and additional investments in automation. Additional details on our guidance can be found in our Q1 twenty twenty five shareholders letter, but at the high level, we expect revenue of between $465,000,000 to $475,000,000 for full year 2025, adjusted EBITDA loss of between $35,000,000 and $39,000,000 for full year 2025 net loss of between $65,000,000 and $69,000,000 for full year 2025 annual run rate by Q4 twenty twenty five of more than $500,000,000 of revenue and generating net profits. And with that operator, I would now like to open the floor to questions.

[Operator]

Thank you. We will now begin the question and answer please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, press star 1. And as a reminder, if you are using a speakerphone, The first question is from the line of Tommy McJoynt with KBW. You may proceed.

[Analyst]

Hi. This is Jane on for Tommy. My first question is on the surplus note. With regards to the note that being raised, what will be the cost of that note? Any detail you can provide? Thank you.

[Richard McCathron, President, CEO & Director at Hippo]

Thank you. Thank you for the question. We're actually quite excited about raising the note for a couple different reasons. One, I think this demonstrates our confidence in the Spinnaker platform, and and the ability for us to continue to grow the Spinnaker platform both from a size perspective and a risk risk participation perspective. The rate that we are getting on this, is approximately 9.5%.

[Richard McCathron, President, CEO & Director at Hippo]

So we think that the marginal rate on that, and the use of that capital and the cost of capital is something that's quite favorable.

[Analyst]

Got it. Makes sense. Just a follow-up on that. You mentioned that it will be, the capital will be used to fund the growth in Spinnaker. I'm sorry.

[Analyst]

Is the the HHIP program or the 14 the in the funding business or both? I can't talk about the position tapping to the the personal versus contributing cash from the holding company?

[Richard McCathron, President, CEO & Director at Hippo]

Yeah. No. This is Rick. I'm I'm happy to answer that too. And then if Guy has anything he wants to add, he certainly will.

[Richard McCathron, President, CEO & Director at Hippo]

The 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 AM best rating, but also for risk participation in the programs we choose to participate in. One valuable aspect of the Spinnaker platform is we can participate in risk and at what amount dependent on our view of the quality of the underlining program. So we believe we have a portfolio of positively selected underwriting business in which we want to continue to take risk and likely take more risk as time goes on based on the historical performance of those particular programs. If you look at Spinnaker excluding Hippo, the performance the loss performance of those programs historically has been below 40%. Even when you include the California wildfires for the non hippo portion, it's sub 60%.

[Richard McCathron, President, CEO & Director at Hippo]

So we're very excited to use those proceeds predominantly to grow the Spinnaker portfolio. That said, we are going to grow the HHIP portfolio now that we have substantially derisked the business or reduced the risk of volatility in the HHIP business. We have rate adequacy. We've diversified some of the concentration of exposures. Hippo policies are written on Spinnaker paper.

[Richard McCathron, President, CEO & Director at Hippo]

So for all intents and purposes, you can consider pooling that amount to help both Spinnaker third party business and Hippo. But we're excited that this will help fund growth without the need to raise equity capital.

[Analyst]

Got it. Thank you so much.

[Operator]

Your last question is from the line of Andrew Anderson with Jefferies. You may proceed.

[Andrew Andersen, Equity Research Vice President at Jefferies Financial Group]

Hey, good afternoon. Can you maybe just talk about how you're thinking about tariffs, whether it be you know, material inflation or just kinda new home sales?

[Richard McCathron, President, CEO & Director at Hippo]

Yeah. Hey, Andrew. It's Rick. I'll go ahead and take this one. When we think about homeowners insurance, specifically, unlike some other types of product lines, essentially, the cost built into replacing homes in the event of total loss are built into the coverage a and premium charged for those.

[Richard McCathron, President, CEO & Director at Hippo]

So our ability to, raise coverage a and the commensurate premium is automatic at each renewals each policy's renewal. Therefore, you're never really more than a year behind on any particular policy as sort of inherent within coverage a and pricing of our policy. Those changes do not require regulatory approval, and our technology platform allows us to really adjust those almost real time as each renewal is approaching. The other aspect by that, flexibility that we have is making sure that we are providing adequate and ample coverage for the protection of policyholders. Our ability to go ahead and increase the coverage a when there's a a total loss event, make sure that even when tariffs have impacted both labor and materials on those particular costs, the customer has the right level of insurance.

[Richard McCathron, President, CEO & Director at Hippo]

So, it's automatic for the most part, and it ensures protection for our customers.

[Andrew Andersen, Equity Research Vice President at Jefferies Financial Group]

Thank you. And then just on the guidance piece, I think I heard net income profitable for 4Q twenty twenty five, and you had given EBITDA guidance for full year 2025. But how are we thinking about kind of getting to EBITDA profitability? Is that something, you know, in for full year '26? Because it it seems to be improving throughout the rest of 2025 is what I'm getting at.

[Guy Zeltser, CFO at Hippo]

Hi, Andrew. This is Guy. Happy to take this question. So first of all, as you mentioned, first of all, I'll I'll start by saying, so if you look at the shareholders letter or guidance that we provided, you can see that we do expect all the key drivers, to improve, throughout the year. And you heard correctly, we we are guiding specifically for q four twenty five to be net income, profitable as well as adjusted EBITDA profitable.

[Guy Zeltser, CFO at Hippo]

And I'll say beyond the guidance for 2025, we're going to have our our investor day in New York next month in June, and we're going to provide guidance or more longer term guidance around that.

[Richard McCathron, President, CEO & Director at Hippo]

Yeah. Andrew, I'll I'll go ahead and I'll go ahead and and add one little one thing to it. So if you look at the guidance range we did for adjusted EBITDA, it was minus 39 to minus 35,000,000. The LA wildfires contributed minus 45 to that number, and that's baked into the guidance. So minus the LA wildfires, we would have had full year adjusted EBITDA profitability for for for February, '25.

[Andrew Andersen, Equity Research Vice President at Jefferies Financial Group]

Thank you. How much of the if if I'm reading it correctly, the EBITDA loss includes the assessment from the fair plan. I guess, one, is that correct? And two, are you able to tell us how much the assessment was?

[Guy Zeltser, CFO at Hippo]

So, Andrew, this is Guy. I'll take this one. So the 45,000,000 number, includes the fair plan assessment. We what we have said in the past, and I just want to reiterate, of the 45,000,000, 12 million belongs to the Spinnaker non EPO programs, and then the rest belongs to the EPO. And, again, it does include the it does include the the Fairplan assessment.

[Guy Zeltser, CFO at Hippo]

What I will say is that we do expect some benefit to be in the future to that number because we have the ability to charge back some of the the Fair Plan cost 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.

[Richard McCathron, President, CEO & Director at Hippo]

Yeah. Just to summarize that, Andrew, 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 being, we're fully loading it and not taking a discount of any potential recoupment.

[Andrew Andersen, Equity Research Vice President at Jefferies Financial Group]

Okay. That that's helpful. Are you able to share how much the assessment was?

[Richard McCathron, President, CEO & Director at Hippo]

I I don't think we're sharing that number just at this, at this juncture. There's a couple different components. Remember, portion of it is, obviously, the HIPAA home insurance program. There's also a portion of it that our Spinnaker fronted business, So that data is still being gathered. But we we think we've put a a conservative, number in there that, that we think is likely.

[Andrew Andersen, Equity Research Vice President at Jefferies Financial Group]

Thank you.

[Richard McCathron, President, CEO & Director at Hippo]

Thanks, Andrew.

[Operator]

There are currently no questions registered. There are no additional questions waiting at this time. I now like to pass the conference back over to Rick McAatherine for any closing remarks.

[Richard McCathron, President, CEO & Director at Hippo]

Well, I just wanna thank each of you for joining us, this evening, and we are very excited about our Investor Day. Again, that's on June 12 in New York City. We are hopeful that you can attend, and we'll have a lot more to talk about both at that event and in subsequent quarters. So thank you very much. Have a great evening.

[Operator]

That concludes today's call. Thank you for your participation, and enjoy the rest of your day.

Participants

Executives

• Mark Olson, Director of Corporate Communications
• Richard McCathron, President, CEO & Director
• Guy Zeltser, CFO

Analysts

• Analyst
• Andrew Andersen, Equity Research Vice President at Jefferies Financial Group