Hippo Holdings, Inc. (NYSE:HIPO) Q1 2023 Earnings Conference Call May 9, 2023 8:00 AM ET Company Participants Clifford Gallant - VP, IR Stewart Ellis - CFO & Treasurer Richard McCathron - President, CEO & Director Conference Call Participants Thomas McJoynt-Griffith - KBW Alexander Scott - Goldman Sachs Group Matthew Carletti - JMP Securities Andrew Andersen - Jefferies Pablo Singzon - JPMorgan Chase & Co. Operator Hello, everyone, and welcome to the Hippo Q1 2023 Earnings Call. My name is Chach and I'll be ...

**Part I. Financial Information** [**Item 1. Consolidated Financial Statements**](index=6&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) The consolidated financial statements for Q1 2023 reflect increased assets, decreased equity due to net loss, and revenue growth [**Consolidated Balance Sheets**](index=6&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2023, total assets increased to $1,604.7 million, while stockholders' equity decreased to $543.0 million, reflecting the net loss Consolidated Balance Sheet Summary | Financial Metric | March 31, 2023 (in millions) | December 31, 2022 (in millions) | | :--- | :--- | :--- | | **Total Assets** | **$1,604.7** | **$1,568.9** | | Total Investments | $431.4 | $445.9 | | Cash and cash equivalents | $188.9 | $194.5 | | **Total Liabilities** | **$1,061.7** | **$975.4** | | Loss and loss adjustment expense reserve | $305.2 | $293.8 | | Unearned premiums | $365.7 | $341.3 | | **Total Stockholders' Equity** | **$543.0** | **$593.5** | [**Consolidated Statements of Operations and Comprehensive Loss**](index=7&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Total revenue grew 62% to $39.8 million, but expenses rose to $107.6 million, leading to a net loss of $69.8 million for Q1 2023 Consolidated Statements of Operations Summary | Metric (in millions) | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | **Total Revenue** | **$39.8** | **$24.5** | | Net earned premium | $13.8 | $9.0 | | Commission income, net | $17.4 | $11.5 | | **Total Expenses** | **$107.6** | **$90.8** | | Losses and loss adjustment expenses | $37.7 | $22.5 | | **Net Loss Attributable to Hippo** | **$(69.8)** | **$(67.6)** | | Net Loss Per Share | $(3.01) | $(3.01) | [**Consolidated Statements of Stockholders' Equity**](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity decreased by $50.5 million to $543.0 million in Q1 2023, primarily due to a $68.1 million net loss Consolidated Statements of Stockholders' Equity Summary | Equity Component (in millions) | Balance at Jan 1, 2023 | Q1 2023 Changes | Balance at Mar 31, 2023 | | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $593.5 | $(50.5) | $543.0 | | Net Loss | - | $(68.1) | - | | Stock-based compensation | - | $17.4 | - | | Other comprehensive income | - | $1.7 | - | [**Consolidated Statements of Cash Flows**](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities improved to $35.7 million, while investing activities generated $13.8 million in Q1 2023 Consolidated Statements of Cash Flows Summary | Cash Flow Activity (in millions) | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(35.7) | $(58.6) | | Net cash provided by (used in) investing activities | $13.8 | $(378.2) | | Net cash used in financing activities | $(1.9) | $(0.3) | | **Net (decrease) in cash** | **$(23.8)** | **$(437.1)** | [**Notes to Consolidated Financial Statements**](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Key notes detail segment realignment, increased reinsurance retention, a $50 million share repurchase, and a post-quarter property purchase - The company realigned its operations into three new reportable segments: Services, Insurance-as-a-Service, and Hippo Home Insurance Program[21](index=21&type=chunk)[107](index=107&type=chunk) - For its 2023 reinsurance treaties, the company expects to retain a significantly higher portion of premium (**approximately 40%** for primary homeowners and **58%** for the builder channel) before purchasing catastrophe protection, compared to **approximately 10%** in 2022[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk) - In March 2023, the Board authorized a **$50.0 million** share repurchase program and approved a one-time repricing of certain employee stock options, resulting in an incremental share-based compensation charge of **$3.6 million**[91](index=91&type=chunk)[100](index=100&type=chunk) - Subsequent to the quarter end, on April 18, 2023, a subsidiary purchased a property in Austin, Texas for **approximately $26.0 million** in cash to be used as office space[117](index=117&type=chunk) [**Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations**](index=32&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses 59% TGP growth to $244.9 million, stable Gross Loss Ratio at 76%, increased Net Loss Ratio to 273%, and a $52.1 million Adjusted EBITDA loss [**Reinsurance**](index=33&type=section&id=Reinsurance) The company significantly increased its 2023 reinsurance retention to 40-58% of premium, up from 10% in 2022, and maintains 1-in-250-year catastrophe coverage - For the 2023 primary homeowners reinsurance treaty, the company expects to retain **approximately 40%** of the premium through its subsidiaries, a significant increase from about **10%** in 2022[132](index=132&type=chunk)[128](index=128&type=chunk) - For business from its builder channel, the company expects to retain **approximately 53%** of the premium in 2023[133](index=133&type=chunk) - The company purchases non-proportional excess of loss (XOL) catastrophe reinsurance to protect against events with a probability of no more than 0.4%, equivalent to a **1-in-250-year event**[135](index=135&type=chunk)[64](index=64&type=chunk) [**Key Operating and Financial Metrics and Non-GAAP Measures**](index=40&type=section&id=Key%20Operating%20and%20Financial%20Metrics%20and%20Non-GAAP%20Measures) Key metrics show TGP grew 59% to $244.9 million, Gross Loss Ratio remained 76%, Net Loss Ratio increased to 273%, and Adjusted EBITDA loss widened to $52.1 million Key Operating and Financial Metrics | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Total Generated Premium | $244.9M | $153.7M | | Adjusted EBITDA | $(52.1)M | $(48.5)M | | Gross Loss Ratio | 76% | 76% | | Net Loss Ratio | 273% | 250% | - The **Hippo Home Insurance Program Gross Loss Ratio (HPGLR)** was **101%** in Q1 2023. Excluding reserve releases, the **Non-PCS component improved to 60% from 78%** in the prior year, indicating benefits from pricing and underwriting actions[196](index=196&type=chunk)[198](index=198&type=chunk) [**Results of Operations**](index=45&type=section&id=Results%20of%20Operations) Total revenue grew 62% to $39.8 million, while total expenses increased 19% to $107.6 million, driven by a 68% rise in loss adjustment expenses Results of Operations Summary | Line Item (in millions) | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | **$39.8** | **$24.5** | **62%** | | Net earned premium | $13.8 | $9.0 | 53% | | Commission income, net | $17.4 | $11.5 | 51% | | **Total Expenses** | **$107.6** | **$90.8** | **19%** | | Losses and loss adjustment expenses | $37.7 | $22.5 | 68% | | Technology and development | $11.6 | $14.7 | (21)% | | Sales and marketing | $22.4 | $24.9 | (10)% | | **Net Loss Attributable to Hippo** | **$(69.8)** | **$(67.6)** | **3%** | [**Liquidity and Capital Resources**](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains liquidity with $220.7 million in cash and $431.4 million in investments, and improved operating cash flow to $(35.7) million - The company held **$220.7 million** in cash and restricted cash and **$431.4 million** in investments as of March 31, 2023[217](index=217&type=chunk) - Net cash used in operating activities decreased to **$35.7 million** in Q1 2023 from **$58.6 million** in Q1 2022[220](index=220&type=chunk)[221](index=221&type=chunk) - The company has an undrawn borrowing capacity of **$40.3 million** from the Federal Home Loan Bank (FHLB) of New York[218](index=218&type=chunk) [**Item 3. Quantitative and Qualitative Disclosures About Market Risk**](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no significant changes to the company's market risk exposure since December 31, 2022 - There have been **no significant changes** to the company's market risk exposure since December 31, 2022[229](index=229&type=chunk) [**Item 4. Controls and Procedures**](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal controls - Management concluded that disclosure controls and procedures were **effective as of the end of the reporting period**[230](index=230&type=chunk) - There were **no changes in internal control over financial reporting** during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[232](index=232&type=chunk) **Part II. Other Information** [**Item 1. Legal Proceedings**](index=51&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in a civil lawsuit by a former employee, Eyal Navon, alleging breach of contract, fraud, and insider trading - Hippo and its co-founder are defendants in a civil action brought by former employee Eyal Navon, with allegations including breach of contract, fraud, and insider-trading[74](index=74&type=chunk)[75](index=75&type=chunk) - The company denies all claims and is engaged in fact discovery, with a **trial date set for November 6, 2023**[77](index=77&type=chunk) [**Item 1A. Risk Factors**](index=51&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred regarding the risk factors disclosed in the company's 2022 Form 10-K - **No material changes have occurred** regarding the risk factors disclosed in the company's 2022 Form 10-K[235](index=235&type=chunk) [**Item 2. Unregistered Sales of Equity Securities and Use of Proceeds**](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Board authorized a $50.0 million share repurchase program in March 2023, with 15,472 shares repurchased for $0.2 million Share Repurchase Program Details | Period | Total Shares Purchased | Average Price Paid | Maximum Value Remaining (in millions) | | :--- | :--- | :--- | :--- | | Jan 2023 | 0 | $0.00 | $50.0 | | Feb 2023 | 0 | $0.00 | $50.0 | | Mar 2023 | 15,472 | $15.46 | $48.8 | - A **share repurchase program of up to $50.0 million was authorized** in March 2023 with **no expiration date**[237](index=237&type=chunk) [**Item 6. Exhibits**](index=53&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including required CEO and CFO certifications and XBRL data - The filing includes required **CEO and CFO certifications** under Sections 302 and 906 of the Sarbanes-Oxley Act[242](index=242&type=chunk)

Hippo Holdings Inc. (NYSE:HIPO) Q4 2022 Results Conference Call March 2, 2023 5:00 PM ET Company Participants Cliff Gallant - Investor Relations Rick McCathron - President and Chief Executive Officer Stewart Ellis - Chief Financial Officer Chris Donahue - Chief Underwriting Officer Conference Call Participants Matt Carletti - JMP Securities Tommy McJoynt - KBW Alex Scott - Goldman Sachs Pablo Singzon - JP Morgan Operator Good afternoon. Thank you for attending today's Hippo Fourth Quarter ‘22 Earnings Call. ...

Commission file number 001-39711 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______. HIPPO HOLDINGS INC. (Exact name of registrant as specified in its charter) Delaware 32-0662604 (State of incorpo ...

Financial Data and Key Metrics Changes - The third quarter adjusted EBITDA loss was $54.8 million, including $4.7 million related to Hurricane Ian, showing an improvement from the previous quarter's loss of $55.8 million [19][23] - Revenue reached $30.7 million, up 44% from Q3 last year, indicating an acceleration in growth compared to Q2 [28] - Net loss attributable to Hippo was $129.2 million or $5.66 per share, compared to a loss of $30.9 million or $2 per share in the prior year quarter [35] Business Line Data and Key Metrics Changes - The builder business accounted for 26% of total Hippo and agency premiums in the quarter, nearly half of new business [24] - Hippo blended premium retention across both Hippo policies and agency customers was 90%, up from 89% in Q2 [12][26] - Gross loss ratio, excluding Hurricane Ian, was 58%, an improvement of 70 percentage points from the previous year [16][28] Market Data and Key Metrics Changes - The customer base reached 332,000 by quarter's end, driven by customer acquisition and retention [12][25] - Growth was noted in states like New York, North Carolina, and Massachusetts, with a focus on attracting "generation better" customers [14][26] Company Strategy and Development Direction - The company aims to achieve adjusted EBITDA profitability by late 2024 while expanding its product offerings [38] - Investments in technology and service capabilities are ongoing to drive long-term growth and enhance customer experience [20][38] - The launch of the "Book a Pro" feature for Texas customers is expected to connect homeowners with home improvement professionals [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in building a superior underwriting model despite challenges from inflation and supply chain issues [10] - The company expects Q4 2022 adjusted EBITDA loss to be below $50 million, with continued improvements anticipated thereafter [19][23] - Management highlighted the importance of maintaining discipline in underwriting and market entry strategies, particularly in Florida [43][44] Other Important Information - The company wrote off a remaining goodwill asset of $53.5 million in the quarter, reflecting market valuation concerns [35] - Total generated premium is expected to be between $790 million and $810 million for the full year, representing over 30% growth [36] Q&A Session Summary Question: How did the company fare from a customer's point of view regarding Hurricane Ian? - Management expressed satisfaction with the proactive response to customers and positive feedback received, highlighting the effectiveness of their underwriting discipline [41][42] Question: What drove the decision to write off goodwill? - The decision was based on routine testing of goodwill and market valuation concerns, as the company's stock was trading below its cash balance [54][55] Question: How does the company view the impact of economic slowdown on different business segments? - Management believes there is still significant upside in the builder channel despite a slowdown, as they are just beginning to tap into opportunities [68][69] Question: What is the company's approach to reinsurance costs and profitability? - Management noted that while the reinsurance market is hardening, their multiyear capacity with partners and improved loss ratios position them well [75][76] Question: How will sales and marketing spend be affected by growth in the builder channel? - Management indicated that sales and marketing strategies are flexible and can be adjusted based on market conditions, with a focus on maintaining customer lifetime value [86][90]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______. Commission file number 001-39711 HIPPO HOLDINGS INC. (Exact name of registrant as specified in its charter) 150 Forest Avenue Palo Alto, ...

Financial Data and Key Metrics Changes - Total generated premium (TGP) increased by 29% year-over-year, reaching $204 million in Q2 2022 compared to $159 million in the prior year quarter [15][26] - Revenue for Q2 was $28.7 million, up 37% from the prior year quarter [29] - Gross loss ratio improved to 78%, an 83 percentage point improvement over Q2 last year [31][39] - Net loss attributable to the company was $73.5 million, or $0.13 per share, compared to a net loss of $84.5 million in the prior year quarter [39] Business Line Data and Key Metrics Changes - The company launched in major states including New York, Massachusetts, and North Carolina, contributing to geographic expansion [16] - Premium retention rate remained high at 87%, despite non-renewing policies not aligned with customer segment goals [20] - The builder channel is now around 10% of the Hippo homeowners program, with significant growth potential [86] Market Data and Key Metrics Changes - The company is now live in 40 states, covering approximately 94% of the U.S. population, but holds less than 1% of the overall homeowners insurance market [28] - The geographic diversification has helped mitigate the impact of adverse weather events on the loss ratio [32] Company Strategy and Development Direction - The company aims to achieve profitability without raising additional capital, focusing on cost containment and operating efficiencies [65][67] - A new brand campaign, "Feel the Housepower," was launched to enhance customer awareness of the company's unique value proposition [22][36] - The company is refining its underwriting and pricing strategies to focus on profitable business segments [27][56] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to succeed in new markets and improve loss ratios despite inflationary pressures [15][44] - The company expects to see continued improvements in loss ratios and profitability as it refines pricing and risk management strategies [17][39] - Management highlighted the importance of geographic diversification in reducing volatility and improving overall performance [32][70] Other Important Information - Cash and investments at the end of the quarter totaled $732 million, with a conservative investment strategy focused on high liquidity [25][38] - The company plans to provide more detailed growth plans and profitability strategies at the upcoming Investor Day [23][65] Q&A Session Summary Question: Can you elaborate on the ongoing improvement in the loss ratio? - Management indicated that improvements stem from smarter growth strategies, targeted customer acquisition, and geographic diversification [43][44] Question: How does the company plan to balance selective underwriting with marketing spend? - Management noted that while they are being selective in underwriting, they expect growth to accelerate in the second half of the year due to improved pricing and marketing efforts [56][58] Question: What is the company's strategy for achieving profitability without raising additional capital? - Management emphasized a focus on cost containment and operational efficiencies, with a goal of reaching cash flow positivity [65][67] Question: How is the company addressing the net loss ratio and reinsurance agreements? - Management explained that the net loss ratio is impacted by lagging reinsurance agreements and that they are exploring more cost-effective structures for future treaties [70][72] Question: What is the current status of the builder channel and its impact on growth? - Management reported that the builder channel is growing rapidly and is expected to continue to contribute positively to the company's growth [86]

(Exact name of registrant as specified in its charter) 150 Forest Avenue Palo Alto, California 94301 (Address of Principal Executive Offices) (Zip Code) Delaware 32-0662604 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transitio ...

[Cautionary Note regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20regarding%20Forward-Looking%20Statements) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements involving risks and uncertainties about future performance - The report contains **forward-looking statements** about future operations, financial condition, and business strategy, identifiable by words like 'anticipate,' 'believe,' 'expect,' and 'plan'[6](index=6&type=chunk) - Key areas covered by forward-looking statements include future results, growth management, customer base expansion, brand maintenance, business strategy, and compliance[6](index=6&type=chunk) - Forward-looking statements are based on current information and assumptions, and the Company does not undertake to update them[7](index=7&type=chunk) [Part I. Financial Information](index=6&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Consolidated Financial Statements](index=6&type=section&id=Item%201%20Consolidated%20Financial%20Statements) This section presents the unaudited consolidated financial statements for the three months ended March 31, 2022 and 2021 [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) The balance sheets show the company's financial position as of March 31, 2022, compared to December 31, 2021 | Metric | March 31, 2022 (in millions) | December 31, 2021 (in millions) | | :--- | :--- | :--- | | Total assets | $1,674.5 | $1,642.7 | | Total liabilities | $865.8 | $781.0 | | Total stockholders' equity | $808.7 | $861.7 | - **Total assets** increased by **$31.8 million**, primarily driven by a significant increase in short-term investments and reinsurance recoverables[9](index=9&type=chunk) - **Total liabilities** increased by **$84.8 million**, mainly due to increases in loss and loss adjustment expense reserves and reinsurance premiums payable[9](index=9&type=chunk) - **Total stockholders' equity** decreased by **$53.0 million**, primarily due to an increased accumulated deficit[9](index=9&type=chunk) [Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The statements detail financial performance for Q1 2022 and Q1 2021, highlighting revenue, expenses, and net loss | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :--- | :--- | :--- | | Total revenue | $24.5 | $17.0 | | Total expenses | $90.8 | $211.8 | | Net loss attributable to Hippo | $(67.6) | $(195.2) | | Net loss per share (basic and diluted) | $(0.12) | $(2.03) | - **Total revenue** increased by **44%** year-over-year, driven by a **121%** increase in commission income and a **24%** increase in service and fee income[11](index=11&type=chunk) - **Total expenses** decreased by **57%** year-over-year, primarily due to a significant reduction in interest and other expense related to prior-year fair value adjustments[11](index=11&type=chunk) - **Net loss attributable to Hippo** significantly decreased by **65%** from $(195.2) million in Q1 2021 to **$(67.6) million** in Q1 2022[11](index=11&type=chunk) [Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity (Deficit)](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity%20(Deficit)) This statement outlines changes in stockholders' equity, reflecting the impact of net loss and stock-based compensation | Metric | Balance at Jan 1, 2022 (in millions) | Balance at Mar 31, 2022 (in millions) | | :--- | :--- | :--- | | Additional paid-in capital | $1,488.3 | $1,504.4 | | Accumulated other comprehensive loss | $(0.7) | $(3.3) | | Accumulated deficit | $(628.0) | $(695.6) | | Total Hippo stockholders' equity | $859.6 | $805.5 | - The **accumulated deficit** increased from $(628.0) million to **$(695.6) million**, primarily due to the net loss of $(67.6) million[14](index=14&type=chunk) - **Stock-based compensation expense** contributed **$15.7 million** to additional paid-in capital during Q1 2022[14](index=14&type=chunk) - **Total Hippo stockholders' equity** decreased from $859.6 million to **$805.5 million** during the period[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The statements present cash flows from operating, investing, and financing activities for Q1 2022 and Q1 2021 | Cash Flow Activity | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :--- | :--- | :--- | | Net cash used in operating activities | $(58.6) | $(15.5) | | Net cash used in investing activities | $(378.2) | $(9.0) | | Net cash (used in) provided by financing activities | $(0.3) | $0.2 | | Net increase in cash, cash equivalents, and restricted cash | $(437.1) | $(24.3) | | Cash, cash equivalents, and restricted cash at end of period | $381.6 | $468.1 | - **Cash used in operating activities** increased significantly to **$(58.6) million** in Q1 2022 from $(15.5) million in Q1 2021[16](index=16&type=chunk) - **Cash used in investing activities** surged to **$(378.2) million** in Q1 2022, mainly driven by substantial purchases of investments[16](index=16&type=chunk) - The Company experienced a net decrease of **$(437.1) million** in cash, resulting in an ending balance of **$381.6 million**[16](index=16&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the Company's accounting policies and specific financial statement line items [1. Description of Business and Summary of Significant Accounting Policies](index=10&type=section&id=1.%20Description%20of%20Business%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note describes Hippo's business model and outlines its basis of presentation and significant accounting policies - Hippo Holdings Inc underwrites, administers, and markets personal and commercial insurance policies through its agency and insurance company subsidiaries[18](index=18&type=chunk) - The Company operates a wholly-owned captive insurance company, **RH Solutions Insurance (Cayman) Ltd**, which assumes insurance risk[18](index=18&type=chunk) - Hippo adopted new accounting standards for **Leases (Topic 842)** and **Financial Instruments — Credit Losses (Topic 326)** effective January 1, 2022[25](index=25&type=chunk)[26](index=26&type=chunk) [2. Investments](index=12&type=section&id=2.%20Investments) This note details the Company's investment portfolio, which consists primarily of fixed maturities and short-term investments | Investment Type | March 31, 2022 (Fair Value in millions) | December 31, 2021 (Fair Value in millions) | | :--- | :--- | :--- | | Fixed maturities available-for-sale | $86.5 | $54.9 | | Short-term investments | $348.9 | $9.1 | | Total investments | $435.4 | $64.0 | - **Total investments** significantly increased from $64.0 million to **$435.4 million**, primarily due to a large increase in short-term investments[33](index=33&type=chunk) | Net Investment Income | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :--- | :--- | :--- | | Fixed maturities income | $0.2 | $0.1 | | Short-term investment income | $0.2 | $— | | Total gross investment income | $0.4 | $0.1 | - The Company determined that unrealized losses were due to the interest rate environment, not creditworthiness[37](index=37&type=chunk) [3. Cash, Cash Equivalents, and Restricted Cash](index=15&type=section&id=3.%20Cash,%20Cash%20Equivalents,%20and%20Restricted%20Cash) This note provides a breakdown of cash, cash equivalents, and restricted cash balances as of March 31, 2022 | Category | March 31, 2022 (in millions) | December 31, 2021 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $336.8 | $775.6 | | Restricted cash | $44.8 | $43.1 | | Total cash, cash equivalents, and restricted cash | $381.6 | $818.7 | - **Total cash, cash equivalents, and restricted cash** decreased by **$437.1 million** from December 31, 2021, to March 31, 2022[42](index=42&type=chunk) [4. Fair Value Measurement](index=16&type=section&id=4.%20Fair%20Value%20Measurement) This note summarizes financial assets and liabilities measured at fair value, categorized by the fair value hierarchy | Financial Assets (March 31, 2022) | Level 1 (in millions) | Level 2 (in millions) | Level 3 (in millions) | Total (in millions) | | :--- | :--- | :--- | :--- | :--- | | Total cash equivalents | $195.4 | $— | $— | $195.4 | | Total fixed maturities available-for-sale | $14.9 | $71.6 | $— | $86.5 | | Short term investments (U.S. government and agencies) | $348.9 | $— | $— | $348.9 | | Total financial assets | $559.2 | $71.6 | $— | $630.8 | | Financial Liabilities (March 31, 2022) | Level 1 (in millions) | Level 2 (in millions) | Level 3 (in millions) | Total (in millions) | | :--- | :--- | :--- | :--- | :--- | | Contingent consideration liability | $— | $— | $14.1 | $14.1 | | Public warrants | $1.6 | $— | $— | $1.6 | | Private placement warrants | $— | $1.5 | $— | $1.5 | | Total financial liabilities | $1.6 | $1.5 | $14.1 | $17.2 | - The **contingent consideration liability**, valued using Level 3 inputs, increased from $11.6 million to **$14.1 million** due to changes in fair value[47](index=47&type=chunk) [5. Intangible Assets](index=19&type=section&id=5.%20Intangible%20Assets) This note provides a breakdown of the Company's intangible assets, net of accumulated amortization | Intangible Asset Type | March 31, 2022 (Net Carrying Amount in millions) | December 31, 2021 (Net Carrying Amount in millions) | | :--- | :--- | :--- | | Agency and carrier relationships | $11.4 | $11.8 | | State licenses and domain name | $10.5 | $10.5 | | Customer relationships | $7.1 | $7.7 | | Developed technology | $— | $0.9 | | Other | $1.3 | $1.3 | | Total intangible assets, net | $30.3 | $32.2 | - **Total intangible assets, net**, decreased from $32.2 million to **$30.3 million** during Q1 2022[53](index=53&type=chunk) - **Amortization expense** for intangible assets increased to **$1.9 million** for Q1 2022 from $1.4 million in the prior year period[53](index=53&type=chunk) [6. Capitalized Internal Use Software](index=19&type=section&id=6.%20Capitalized%20Internal%20Use%20Software) This note presents the carrying amount and amortization for capitalized internal use software | Metric | March 31, 2022 (in millions) | December 31, 2021 (in millions) | | :--- | :--- | :--- | | Capitalized internal use software | $40.7 | $34.5 | | Less: accumulated amortization | $(10.4) | $(8.6) | | Total capitalized internal use software | $30.3 | $25.9 | - **Total capitalized internal use software, net**, increased from $25.9 million to **$30.3 million** during Q1 2022[54](index=54&type=chunk) - **Amortization expense** for capitalized internal use software increased to **$1.8 million** for Q1 2022 from $1.0 million in the prior year period[54](index=54&type=chunk) [7. Other Assets](index=20&type=section&id=7.%20Other%20Assets) This note details the components of other assets, including prepaid expenses and lease right-of-use assets | Other Asset Type | March 31, 2022 (in millions) | December 31, 2021 (in millions) | | :--- | :--- | :--- | | Prepaid expenses | $26.1 | $21.2 | | Claims receivable | $25.0 | $24.4 | | Lease right-of-use assets | $15.9 | $— | | Other | $8.8 | $6.2 | | Total other assets | $75.8 | $51.8 | - **Total other assets** increased by **$24.0 million**, primarily due to the recognition of **lease right-of-use assets of $15.9 million**[56](index=56&type=chunk) [8. Accrued Expenses and Other Liabilities](index=20&type=section&id=8.%20Accrued%20Expenses%20and%20Other%20Liabilities) This note outlines the components of accrued expenses and other liabilities, including lease and fiduciary liabilities | Liability Type | March 31, 2022 (in millions) | December 31, 2021 (in millions) | | :--- | :--- | :--- | | Claim payments outstanding | $25.3 | $23.2 | | Lease liability | $16.6 | $— | | Advances from customers | $13.7 | $8.7 | | Deferred revenue | $10.8 | $11.2 | | Employee related accruals | $8.1 | $8.5 | | Premium refund liability | $6.1 | $4.8 | | Fiduciary liability | $4.6 | $3.7 | | Accrued licenses and taxes | $3.2 | $5.8 | | Warrant liability | $3.1 | $4.3 | | Other | $9.6 | $13.6 | | Total accrued expenses and other liabilities | $101.1 | $83.8 | - **Total accrued expenses and other liabilities** increased by **$17.3 million**, primarily due to the recognition of a **$16.6 million lease liability**[57](index=57&type=chunk) [9. Loss and Loss Adjustment Expense Reserves](index=21&type=section&id=9.%20Loss%20and%20Loss%20Adjustment%20Expense%20Reserves) This note reconciles the beginning and ending balances of loss and loss adjustment expense (LAE) reserves | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :--- | :--- | :--- | | Reserve for losses and LAE, net of reinsurance recoverables as of beginning of the period | $43.8 | $13.0 | | Total incurred losses and LAE, net of reinsurance | $22.5 | $19.0 | | Total paid losses and LAE, net of reinsurance | $19.2 | $14.2 | | Reserve for losses and LAE, net of reinsurance recoverables at end of period | $47.1 | $17.8 | | Reserve for losses and LAE gross of reinsurance recoverables as of end of the period | $282.4 | $167.9 | - Net incurred losses and LAE experienced **favorable development of $2.8 million** for Q1 2022, primarily from the 2021 accident year[60](index=60&type=chunk) [10. Reinsurance](index=21&type=section&id=10.%20Reinsurance) This note explains the Company's reinsurance strategy to manage exposure to property and casualty risks - Hippo utilizes proportional and non-proportional reinsurance to manage risk, retaining approximately **10% of the premium**[62](index=62&type=chunk)[63](index=63&type=chunk)[66](index=66&type=chunk) - Reinsurance contracts include variable commission adjustments and loss participation features, which may increase the amount of risk retained[65](index=65&type=chunk)[68](index=68&type=chunk) | Metric (in millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Gross Written Premiums | $117.1 | $99.2 | | Ceded Written Premiums | $(116.5) | $(92.0) | | Net Written Premiums | $0.6 | $7.2 | | Gross Earned Premiums | $120.1 | $74.4 | | Ceded Earned Premiums | $(111.1) | $(65.6) | | Net Earned Premiums | $9.0 | $8.8 | | Gross Loss and LAE incurred | $91.2 | $147.4 | | Ceded Loss and LAE incurred | $(68.7) | $(128.4) | | Net Loss and LAE incurred | $22.5 | $19.0 | [11. Geographical Breakdown of Gross Written Premium](index=23&type=section&id=11.%20Geographical%20Breakdown%20of%20Gross%20Written%20Premium) This note provides a geographical breakdown of the Company's gross written premium (GWP) by state | State | Three Months Ended March 31, 2022 (Amount in millions) | % of GWP (2022) | Three Months Ended March 31, 2021 (Amount in millions) | % of GWP (2021) | | :--- | :--- | :--- | :--- | :--- | | Texas | $33.9 | 28.9% | $33.0 | 33.3% | | California | $22.1 | 18.9% | $18.9 | 19.1% | | Florida | $6.8 | 5.8% | $5.8 | 5.8% | | Georgia | $6.1 | 5.2% | $4.1 | 4.1% | | Illinois | $3.5 | 3.0% | $3.1 | 3.1% | | Colorado | $3.2 | 2.7% | $2.5 | 2.5% | | Missouri | $3.0 | 2.6% | $2.4 | 2.4% | | Arizona | $3.1 | 2.6% | $2.4 | 2.4% | | Ohio | $2.6 | 2.2% | $2.0 | 2.0% | | New Jersey | $2.6 | 2.2% | $2.2 | 2.2% | | Other | $30.2 | 25.8% | $22.8 | 23.0% | | Total | $117.1 | 100% | $99.2 | 100% | - **Gross written premium** increased to **$117.1 million** in Q1 2022 from $99.2 million in Q1 2021, with Texas and California remaining the largest markets[76](index=76&type=chunk) [12. Commitments and Contingencies](index=24&type=section&id=12.%20Commitments%20and%20Contingencies) This note discusses the Company's legal proceedings, including a civil action against Hippo and its CEO - Hippo is involved in a civil action where its CEO is accused of breach of fiduciary duty, breach of contract, and fraud[79](index=79&type=chunk) - The Court initially dismissed claims against Hippo without prejudice, but an amended complaint re-pleaded several causes of action[80](index=80&type=chunk) - The Company believes no pending litigation is likely to have a **material adverse effect** on its business or financial condition[78](index=78&type=chunk) [13. Leases](index=25&type=section&id=13.%20Leases) This note provides information on the Company's operating leases for office space - The Company leases office space under non-cancelable operating leases expiring through 2026[83](index=83&type=chunk) | Metric | Value | | :--- | :--- | | Weighted average remaining lease term | 4.29 years | | Weighted average discount rate | 3.38% | | Fiscal Year | Operating Leases (in millions) | | :--- | :--- | | 2022 (Remainder) | $2.9 | | 2023 | $3.9 | | 2024 | $4.0 | | 2025 | $3.7 | | 2026 | $2.7 | | Total undiscounted lease payments | $17.2 | | Present value of lease payments | $16.6 | - The Company recognized **$1.0 million** in operating lease expense for the three months ended March 31, 2022[84](index=84&type=chunk) [14. Stockholders' Equity](index=25&type=section&id=14.%20Stockholders'%20Equity) This note details the Company's common stock, stock-based compensation plans, and related activity - Hippo's common stock trades on the NYSE under 'HIPO', with **567,754,016 shares outstanding** as of March 31, 2022[86](index=86&type=chunk)[9](index=9&type=chunk) - The **2021 Incentive Award Plan** authorized 78,000,000 shares for issuance, with an annual increase of up to 5% of outstanding common stock[90](index=90&type=chunk) | Stock-Based Compensation Expense (in millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Losses and loss adjustment expenses | $0.7 | $0.1 | | Insurance related expenses | $1.3 | $0.1 | | Technology and development | $5.2 | $0.4 | | Sales and marketing | $2.4 | $1.0 | | General and administrative | $3.8 | $0.9 | | Total stock-based compensation expense | $13.4 | $2.5 | - Total unrecognized compensation cost was **$25.2 million** for stock options and **$90.9 million** for unvested RSUs as of March 31, 2022[92](index=92&type=chunk)[97](index=97&type=chunk) [15. Income Taxes](index=28&type=section&id=15.%20Income%20Taxes) This note discusses the Company's income tax expense and effective tax rate | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Income tax expense | $0.2 million | $0.1 million | | Effective tax rate | (0.3)% | (0.1)% | - The effective tax rate was significantly lower than the U.S. federal rate of 21% due to a **full valuation allowance** against net deferred tax assets[104](index=104&type=chunk) [16. Net Loss Per Share Attributable to Common Stockholders](index=28&type=section&id=16.%20Net%20Loss%20Per%20Share%20Attributable%20to%20Common%20Stockholders) This note details the computation of basic and diluted net loss per share | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net loss attributable to Hippo (in millions) | $(67.6) | $(195.2) | | Weighted-average shares used in computing net loss per share (basic and diluted) | 561,620,061 | 95,970,269 | | Net loss per share attributable to Hippo (basic and diluted) | $(0.12) | $(2.03) | - Potential common shares totaling **87,492,918** as of March 31, 2022 were excluded from diluted EPS calculation due to their antidilutive effect[108](index=108&type=chunk) [Item 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations](index=30&type=section&id=Item%202%20Management's%20Discussion%20And%20Analysis%20Of%20Financial%20Condition%20And%20Results%20Of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations [Overview](index=30&type=section&id=Overview) Hippo aims to be a home protection company offering an integrated platform with real-time data and smart home technology - Hippo positions itself as a digital-first, customer-centric home protection company offering a **proactive insurance experience**[110](index=110&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) - The Company's strategy is to create a 'virtuous cycle' by making homes safer, improving risk outcomes, and increasing customer loyalty[114](index=114&type=chunk) [Our Asset-Light Capital Model and Reinsurance](index=31&type=section&id=Our%20Asset-Light%20Capital%20Model%20and%20Reinsurance) Hippo employs an asset-light capital strategy, relying heavily on third-party reinsurance to support growth - Hippo's **asset-light capital strategy** involves retaining minimal risk on its balance sheet to decrease statutory capital requirements[115](index=115&type=chunk)[116](index=116&type=chunk) - The Company uses proportional and non-proportional reinsurance, retaining approximately **10% of the premium**[117](index=117&type=chunk)[118](index=118&type=chunk) - The 2022 reinsurance agreements feature increased use of **loss participation clauses**, which may lead to the Company retaining more risk[117](index=117&type=chunk) [Key Factors and Trends Affecting our Operating Results](index=32&type=section&id=Key%20Factors%20and%20Trends%20Affecting%20our%20Operating%20Results) Operating results are influenced by customer acquisition, geographic expansion, and seasonal patterns in claims - Operating results are affected by the Company's ability to attract and retain customers, expand nationally, and manage risk[121](index=121&type=chunk)[126](index=126&type=chunk) - Customer acquisition shows seasonal patterns, with greater demand expected during the **summer months (Q3)**[122](index=122&type=chunk) - Claims losses are impacted by seasonal weather patterns, including hurricanes, wildfires, and hailstorms[123](index=123&type=chunk) [Basis of Presentation](index=32&type=section&id=Basis%20of%20Presentation) The consolidated financial statements are prepared in accordance with U.S. GAAP as determined by the FASB and SEC - The consolidated financial statements are prepared in accordance with **U.S. GAAP**, as determined by the FASB and SEC regulations[124](index=124&type=chunk) [Components of Results of Operations](index=32&type=section&id=Components%20of%20Results%20of%20Operations) This section defines the key revenue and expense components that make up Hippo's results of operations - Revenue components include **Gross Written Premium**, **Ceded Written Premium**, **Net Earned Premium**, and various Commission Incomes[125](index=125&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[131](index=131&type=chunk) - **Service and Fee Income** primarily consists of policy fees, while **Net Investment Income** is derived from investments[133](index=133&type=chunk)[134](index=134&type=chunk) - Expense categories include **Losses and Loss Adjustment Expenses**, **Insurance Related Expenses**, **Technology and Development**, and **Sales and Marketing**[136](index=136&type=chunk)[137](index=137&type=chunk)[139](index=139&type=chunk)[141](index=141&type=chunk) [Key Operating and Financial Metrics and Non-GAAP Measures](index=36&type=section&id=Key%20Operating%20and%20Financial%20Metrics%20and%20Non-GAAP%20Measures) This section outlines key metrics used by management to evaluate business performance, including non-GAAP measures | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :--- | :--- | :--- | | Total Generated Premium | $153.7 | $123.1 | | Total Revenue | $24.5 | $17.0 | | Net Loss attributable to Hippo | $(67.6) | $(195.2) | | Adjusted EBITDA | $(48.5) | $(35.6) | | Gross Loss Ratio | 76% | 198% | | Net Loss Ratio | 250% | 216% | - **Total Generated Premium (TGP)** increased by **25%** year-over-year to **$153.7 million**, driven by growth in existing and new states[152](index=152&type=chunk)[153](index=153&type=chunk) - **Net loss attributable to Hippo** decreased by **$127.6 million**, primarily due to a $148.1 million decrease in other expense related to prior-year warrant fair value losses[157](index=157&type=chunk) - **Adjusted EBITDA loss** increased to **$(48.5) million** from $(35.6) million, mainly due to higher employee-related and public company costs[159](index=159&type=chunk)[160](index=160&type=chunk) - **Gross Loss Ratio** improved significantly from 198% to **76%**, primarily due to the impact of Texas winter storm Uri in Q1 2021[163](index=163&type=chunk)[164](index=164&type=chunk) - **Net Loss Ratio** increased from 216% to **250%**, attributed to higher loss expenses from increased risk retention in reinsurance treaties[166](index=166&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of consolidated results for Q1 2022 and Q1 2021 | Metric (in millions) | March 31, 2022 | March 31, 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net earned premium | $9.0 | $8.8 | $0.2 | 2% | | Commission income, net | $11.5 | $5.2 | $6.3 | 121% | | Service and fee income | $3.6 | $2.9 | $0.7 | 24% | | Net investment income | $0.4 | $0.1 | $0.3 | 300% | | Total revenue | $24.5 | $17.0 | $7.5 | 44% | | Losses and loss adjustment expenses | $22.5 | $19.0 | $3.5 | 18% | | Insurance related expenses | $13.2 | $5.8 | $7.4 | 128% | | Technology and development | $14.7 | $6.9 | $7.8 | 113% | | Sales and marketing | $24.9 | $24.7 | $0.2 | 1% | | General and administrative | $16.5 | $8.3 | $8.2 | 99% | | Interest and other (income) expense | $(1.0) | $147.1 | $(148.1) | (101)% | | Total expenses | $90.8 | $211.8 | $(121.0) | (57)% | | Net loss attributable to Hippo | $(67.6) | $(195.2) | $127.6 | (65)% | - **Commission income, net**, surged by **121%** due to increased ceding commissions and fronting fees from business growth[171](index=171&type=chunk) - **Losses and loss adjustment expenses** increased by **$3.5 million**, driven by higher employee-related expenses and increased loss participation features[174](index=174&type=chunk) - **Technology and development expenses** increased by **113%** due to higher employee-related costs to support business growth[178](index=178&type=chunk) - **General and administrative expenses** nearly doubled, primarily due to increased employee-related costs and public company requirements[180](index=180&type=chunk) - **Interest and other (income) expense** saw a **$148.1 million positive change**, mainly because of significant fair value losses on warrants recorded in Q1 2021[182](index=182&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses Hippo's liquidity sources, cash flow activities, and material cash requirements - As of March 31, 2022, Hippo had **$381.6 million** in cash and restricted cash and **$435.4 million** in investments[185](index=185&type=chunk) - The Company has a **$19.2 million** secured borrowing capacity with the FHLB of New York, with no outstanding amounts[185](index=185&type=chunk) | Cash Flow Activity | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(58.6) | $(15.5) | $(43.1) | | Net cash used in investing activities | $(378.2) | $(9.0) | $(369.2) | | Net cash (used in) provided by financing activities | $(0.3) | $0.2 | $(0.5) | - **Cash used in investing activities** significantly increased by **$369.2 million**, primarily due to substantial purchases of investments in Q1 2022[190](index=190&type=chunk) - A subsidiary entered an agreement to purchase real property in Austin, Texas, for approximately **$30.0 million** in cash[194](index=194&type=chunk)[196](index=196&type=chunk) [Critical Accounting Policies and Estimates](index=45&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights critical accounting policies that require significant management judgment - The preparation of financial statements requires management to make estimates, particularly for **loss reserves** and **fair value measurements**[198](index=198&type=chunk) - Actual results may differ significantly from these estimates, which are informed by experience and reasonable assumptions[198](index=198&type=chunk) [Recent Accounting Pronouncements](index=45&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note 1 of the consolidated financial statements for details on recent accounting pronouncements - Information on recent accounting pronouncements is incorporated by reference from **Note 1** to the consolidated financial statements[199](index=199&type=chunk) [Emerging Growth Company Status](index=45&type=section&id=Emerging%20Growth%20Company%20Status) Hippo qualifies as an 'emerging growth company' under the JOBS Act, affecting accounting standard adoption timing - Hippo qualifies as an **'emerging growth company'** and has elected to adopt new accounting guidance within the same time periods as private companies[200](index=200&type=chunk)[201](index=201&type=chunk) - This election may make the Company's financial statements difficult to compare to those of other public companies[201](index=201&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to the Annual Report on Form 10-K for a discussion of financial market risks - For financial market risks, refer to Item 7A in the **Annual Report on Form 10-K** for the year ended December 31, 2021[202](index=202&type=chunk) - The Company's exposure to market risk has not changed significantly since December 31, 2021[202](index=202&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the Company's disclosure controls and procedures were effective as of March 31, 2022 - Management concluded that the Company's **disclosure controls and procedures were effective** as of March 31, 2022[204](index=204&type=chunk) - Controls and procedures are designed to provide **reasonable assurance**, acknowledging inherent limitations[205](index=205&type=chunk) - There were **no material changes** in the Company's internal control over financial reporting during the most recent fiscal quarter[206](index=206&type=chunk) [Part II. Other Information](index=47&type=section&id=Part%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=47&type=section&id=Item%201%20Legal%20Proceedings) This section incorporates by reference the legal proceedings information from Note 12 of the financial statements - Information regarding legal proceedings is incorporated by reference from **Note 12 Commitments and Contingencies**[208](index=208&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A%20Risk%20Factors) This section outlines numerous risks that could adversely affect the company's business, financial condition, and results [SUMMARY RISK FACTORS](index=47&type=section&id=SUMMARY%20RISK%20FACTORS) This summary highlights key risks including a history of net losses, competition, reinsurance, and regulatory compliance - Key business risks include a **history of net losses**, dependence on customer retention, brand reputation, and claims management[210](index=210&type=chunk) - Industry-specific risks involve intense competition, **reinsurance availability**, capital requirements, and reliance on technology[210](index=210&type=chunk)[211](index=211&type=chunk) - Operational and regulatory risks include data privacy laws, intellectual property protection, and reliance on key personnel[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk) - Market risks include the cyclical nature of insurance, impact of catastrophes, economic downturns, and stock price volatility[213](index=213&type=chunk)[214](index=214&type=chunk) [Risks Related to Our Business](index=50&type=section&id=Risks%20Related%20to%20Our%20Business) This section details operational risks including net losses, customer retention, reinsurance, and technology reliance - Hippo has a history of net losses and an **accumulated deficit of $695.6 million** as of March 31, 2022[214](index=214&type=chunk)[215](index=215&type=chunk) - The Company's success depends on retaining and expanding its customer base, which is challenged by competition and regulatory hurdles[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) - Hippo relies on an asset-light model with significant reinsurance, but faces risks if **reinsurance is unavailable** or reinsurers fail to meet obligations[232](index=232&type=chunk)[234](index=234&type=chunk)[236](index=236&type=chunk) - The Company's proprietary technology is complex and prone to errors, which could lead to **incorrect pricing** and customer dissatisfaction[244](index=244&type=chunk)[245](index=245&type=chunk) - Hippo is subject to extensive data privacy laws, and any failure to comply could result in **regulatory fines** and reputational harm[282](index=282&type=chunk)[283](index=283&type=chunk)[285](index=285&type=chunk)[272](index=272&type=chunk) - The Company's success depends on its founder, senior management, and key personnel, and their loss could harm the business[300](index=300&type=chunk)[302](index=302&type=chunk) [Risks Related to Our Industry](index=67&type=section&id=Risks%20Related%20to%20Our%20Industry) This section addresses broader industry risks such as cyclicality, reserve uncertainty, regulation, and catastrophes - The insurance industry is **cyclical**, characterized by periods of intense price competition which could impair profitability[338](index=338&type=chunk)[339](index=339&type=chunk) - Financial condition depends on accurately assessing **loss and LAE reserves**, which are estimates and may prove inadequate[340](index=340&type=chunk)[341](index=341&type=chunk)[344](index=344&type=chunk)[345](index=345&type=chunk) - The Company is subject to **extensive state-level insurance regulations**, and non-compliance could lead to fines or license revocation[346](index=346&type=chunk)[347](index=347&type=chunk)[349](index=349&type=chunk)[351](index=351&type=chunk)[352](index=352&type=chunk) - The **COVID-19 pandemic** has disrupted operations, impacted loss ratios, and negatively affected economic growth[359](index=359&type=chunk)[361](index=361&type=chunk)[362](index=362&type=chunk)[363](index=363&type=chunk) - **Severe weather events and catastrophes**, including climate change effects, can significantly increase claims costs and impact liquidity[364](index=364&type=chunk)[365](index=365&type=chunk)[367](index=367&type=chunk) - Results of operations are expected to fluctuate quarterly due to seasonality and external factors, which could affect financial results[368](index=368&type=chunk)[369](index=369&type=chunk) [Risks Related to Ownership of Our Common Stock](index=76&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) This section covers risks for stockholders, including market volatility, anti-takeover provisions, and dividend policy - The market price of Hippo's common stock and warrants may be **highly volatile** due to various factors[390](index=390&type=chunk)[394](index=394&type=chunk) - Provisions in Hippo's Certificate of Incorporation and Bylaws contain **anti-takeover effects** that could deter a third-party acquisition[393](index=393&type=chunk)[395](index=395&type=chunk)[396](index=396&type=chunk) - State insurance laws require **regulatory approval for any change of control**, which could delay or prevent an acquisition[397](index=397&type=chunk) - Hippo does not currently expect to pay **cash dividends** on its common stock for the foreseeable future[411](index=411&type=chunk)[412](index=412&type=chunk) - Being a public company imposes **significant legal, accounting, and compliance costs**[413](index=413&type=chunk)[414](index=414&type=chunk)[415](index=415&type=chunk)[416](index=416&type=chunk) - Outstanding warrants to purchase **9,000,000 shares** of common stock could result in dilution to existing stockholders if exercised[419](index=419&type=chunk) - Warrants are accounted for as **derivative liabilities**, and changes in their fair value could materially affect financial results[423](index=423&type=chunk)[424](index=424&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=89&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there are no unregistered sales of equity securities or use of proceeds to report - This item is **not applicable**, indicating no unregistered sales of equity securities or use of proceeds to report[425](index=425&type=chunk) [Item 3. Defaults Upon Senior Securities](index=89&type=section&id=Item%203%20Defaults%20Upon%20Senior%20Securities) This section states that there are no defaults upon senior securities to report - This item is **not applicable**, indicating no defaults upon senior securities to report[426](index=426&type=chunk) [Item 4. Mine Safety Disclosures](index=89&type=section&id=Item%204%20Mine%20Safety%20Disclosures) This section states that there are no mine safety disclosures to report - This item is **not applicable**, indicating no mine safety disclosures to report[427](index=427&type=chunk) [Item 5. Other Information](index=89&type=section&id=Item%205%20Other%20Information) This section discloses the purchase of real property in Austin, Texas, for office space - On February 24, 2022, a subsidiary entered into an agreement to purchase real property in Austin, Texas, for approximately **$30.0 million** in cash[428](index=428&type=chunk) - A **$2.0 million escrow deposit** was made for the property, which will be used as office space[428](index=428&type=chunk) - An affiliate is currently party to a lease for a portion of this property, with future minimum rental payments totaling **$11.7 million**[429](index=429&type=chunk) [Item 6. Exhibits](index=90&type=section&id=Item%206%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications and XBRL interactive data files - The exhibits include the **Purchase and Sale Agreement**, CEO and CFO certifications, and XBRL data files[431](index=431&type=chunk) [Signatures](index=91&type=section&id=Signatures) This section contains the required signatures of the registrant's Chief Executive Officer and Chief Financial Officer - The report is signed by the **Chief Executive Officer** and **Chief Financial Officer** on May 16, 2022[434](index=434&type=chunk)[435](index=435&type=chunk)

Financial Data and Key Metrics Changes - Total generated premium grew 25% year-over-year, reaching $154 million in Q1 2022 compared to $123 million in Q1 2021 [30] - Revenues increased by 44% year-over-year to $24 million, driven by net premiums earned and commissions [32] - Gross loss ratio improved to 76.1%, a significant reduction from 138% in 2021 [34][41] Business Line Data and Key Metrics Changes - The homebuilder business is the fastest growing and most profitable channel, with a focus on integrating insurance into the home buying process [11][12] - The company launched new products, including excess and surplus lines for earthquake and flood coverage [23] - Rate changes were implemented across 10 states, with a focus on better segmentation and pricing [25][27] Market Data and Key Metrics Changes - Growth was balanced across geographies, with two-thirds of growth occurring outside Texas and California [20] - The company launched operations in New York in late April 2022, with expectations for additional states in upcoming quarters [21] - The builder channel is expected to expand with new partnerships in the mortgage lender channels [22] Company Strategy and Development Direction - The company aims to create a nationwide, consistently profitable homeowners protection company, focusing on customer service [28] - There is an emphasis on refining pricing and underwriting models to better match price to risk [15] - The company plans to invest in marketing programs to increase brand awareness [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year guidance of total generated premium between $800 million and $820 million [31][42] - The company is optimistic about future improvements in loss ratios due to geographic diversification and advanced pricing strategies [16][60] - Management acknowledged the challenges posed by inflation but believes their underwriting practices will mitigate risks [84] Other Important Information - Cash and investments at the end of the quarter totaled $772 million, with a strategic shift of $349 million to U.S. treasury bills [39][40] - The company is planning an Investor Day on September 6 in New York City to discuss future plans [18] Q&A Session Summary Question: Commentary on building earthquake and flood products - Management explained the decision to build products in-house to provide proper coverage for customers, while also utilizing partnerships for other programs [48] Question: Clarification on net earned premiums being flat - Management attributed the flat net earned premiums to accounting dynamics related to reinsurance treaties [50][52] Question: Expected underlying growth loss ratio for 2022 - Management confirmed expectations for continued improvement in both underlying and total loss ratios [60] Question: Impact of catastrophes on net loss ratio - Management provided details on the net reserve release and its impact on the net loss ratio [61] Question: Thoughts on inflation and its impact on homeowners - Management discussed how their underwriting practices allow them to stay ahead of inflationary pressures [84][86] Question: Update on MGA partnerships - Management highlighted the benefits of partnerships with multiple underwriting companies for better segmentation and capital structure [92][94] Question: Geographic exposure to wildfires in California - Management stated they are not overly exposed to wildfire risks, using fire line metrics to assess risk [97] Question: Stock performance and strategic considerations - Management reiterated their focus on building a valuable company and reducing loss ratios, expressing optimism for the future [100][101]