(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]

Part I [Item 1. Business](index=9&type=section&id=Item%201.%20Business) Hippo Holdings Inc. modernizes the **$110 billion** U.S. home insurance industry with technology and data, providing proactive home protection [Our Vision, Mission, and Company Overview](index=9&type=section&id=Our%20Vision%2C%20Mission%2C%20and%20Company%20Overview) Hippo's vision is to protect the joy of homeownership by delivering intuitive and proactive protection, combining technology with a human touch - Hippo's vision is to protect the joy of homeownership by delivering intuitive and proactive protection, combining technology with a human touch[19](index=19&type=chunk) - The company aims to transform the **$110 billion** U.S. home insurance industry, which it views as dominated by incumbents with outdated models, by creating an integrated home protection platform using real-time data and smart home technology[21](index=21&type=chunk)[23](index=23&type=chunk) - Hippo's approach is designed to create a virtuous cycle: making homes safer leads to better risk outcomes and customer loyalty, which improves economics, allowing for further investment in product offerings and marketing to attract more customers[31](index=31&type=chunk) [The Hippo Business Approach](index=12&type=section&id=The%20Hippo%20Business%20Approach) Hippo's business approach focuses on delivering a superior customer experience through easy purchasing, modern policies, proactive claims, and smart home programs - Hippo's business approach focuses on a superior customer experience through several key pillars[41](index=41&type=chunk)[42](index=42&type=chunk) - Easy Purchasing: Provides a quote in under **60 seconds** and a policy in about **5 minutes** by pre-filling applications with data from trusted sources[44](index=44&type=chunk) - Modern Policies: Coverage is designed for modern homeowners, including items like home office equipment and service lines, while limiting obsolete coverage[44](index=44&type=chunk) - Proactive Claims Experience: Utilizes a 'Claims Concierge' for a human touch, remote inspection technology to expedite claims, and a network of vetted repair partners[44](index=44&type=chunk)[45](index=45&type=chunk) - Smart Home Program: Offers smart home kits to mitigate damage from water, fire, and theft, with premium discounts for customers who use them[48](index=48&type=chunk) [Distribution and Technology](index=14&type=section&id=Distribution%20and%20Technology) Hippo employs an omni-channel distribution strategy and a full-stack technology platform to enable rapid growth and a frictionless customer experience - Hippo employs an omni-channel distribution strategy to meet customers where they prefer to shop[49](index=49&type=chunk) - Direct to Consumer: Offers digital purchasing and online account management[51](index=51&type=chunk) - Insurance Partners: Provides a dedicated portal for traditional insurance agents, integrating with industry tools to streamline workflows[51](index=51&type=chunk) - Non-insurance Partners: The fastest-growing channel, involving integrations with home builders, mortgage originators, and smart home providers to offer insurance at relevant points in the customer journey[51](index=51&type=chunk) - The company's full-stack technology platform enables rapid growth, risk prevention through ongoing underwriting, and a frictionless customer experience from purchase to claims[68](index=68&type=chunk)[69](index=69&type=chunk)[71](index=71&type=chunk) [Economic Model and Growth Strategy](index=19&type=section&id=Economic%20Model%20and%20Growth%20Strategy) Hippo's economic model relies on MGA commissions, agency commissions, insurance-as-a-service fees, and retained premium margins, supported by an asset-light capital strategy - Hippo's economic model has four key components: 1) MGA commissions and fees, 2) agency commission from selling non-Hippo policies, 3) insurance-as-a-service fees from its carrier platform, and 4) margin on retained premiums[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) - The company pursues an asset-light capital strategy, ceding the majority of insurance risk to a panel of reinsurance partners, retaining approximately **12%** of the risk for policies written in 2021[81](index=81&type=chunk) - Growth strategy includes: increasing penetration in the **37 states** where it operates, expanding into new states, offering adjacent insurance products, and providing non-insurance home protection services like home warranties and maintenance[83](index=83&type=chunk)[85](index=85&type=chunk)[87](index=87&type=chunk) [Regulation and Intellectual Property](index=22&type=section&id=Regulation%20and%20Intellectual%20Property) The company is subject to extensive state-level insurance and data privacy regulations, while protecting its intellectual property through patents and trademarks - The company is subject to extensive state-level insurance regulations governing areas like solvency, licensing, policy forms, rates, and claims practices, and also federal and state data privacy laws such as the Gramm-Leach-Bliley Act and the CCPA[95](index=95&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk) - As an insurance holding company, Hippo is subject to additional reporting requirements regarding enterprise risk, and its insurance subsidiaries' ability to pay dividends is restricted by state law[101](index=101&type=chunk)[105](index=105&type=chunk) - As of December 31, 2021, Hippo's intellectual property portfolio included **two utility patents**, **10 pending patent applications**, and **42 trademarks**, including the Hippo name in the United States and numerous other countries[108](index=108&type=chunk) [Item 1A. Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks across its business, industry, and stock ownership, including net losses, intense competition, reinsurance dependency, and exposure to catastrophic events [Risks Related to Our Business](index=25&type=section&id=Risks%20Related%20to%20Our%20Business) Business risks include a history of net losses, dependence on customer growth, intense competition, reliance on reinsurance, and risks related to technology and data - The company has a history of net losses, with a net loss of **$367.9 million** in 2021, and may not achieve or maintain profitability in the future due to significant investments[113](index=113&type=chunk) - Hippo faces intense competition from large, established insurance companies with greater name recognition and resources, as well as from other insurtech companies[125](index=125&type=chunk)[128](index=128&type=chunk) - The business is heavily dependent on reinsurance to manage exposure, which may become unavailable or available only at unfavorable terms, and the company is subject to counterparty credit risk from its reinsurers[129](index=129&type=chunk) - The company's ability to accurately underwrite risks and charge profitable rates is critical, as inaccurate pricing could lead to inadequate premiums to cover losses and expenses[136](index=136&type=chunk)[137](index=137&type=chunk) - Reliance on proprietary technology and third-party data presents risks, as system failures, bugs, or security incidents could impair operations and harm the company's reputation[141](index=141&type=chunk)[166](index=166&type=chunk) [Risks Related to Our Industry](index=47&type=section&id=Risks%20Related%20to%20Our%20Industry) Industry risks stem from the cyclical nature of insurance, potential for actual losses to exceed reserves, extensive regulation, and exposure to unpredictable catastrophic events - The homeowners' insurance business is historically cyclical, subject to periods of intense price competition and unfavorable premium rates[231](index=231&type=chunk) - Actual incurred losses may be greater than established loss and loss adjustment expense reserves, as reserving is an inherently uncertain process, potentially harming financial condition[233](index=233&type=chunk)[234](index=234&type=chunk) - The company is subject to extensive and complex insurance industry regulations at the state level, which can impact rates, product forms, and underwriting practices[238](index=238&type=chunk)[241](index=241&type=chunk)[246](index=246&type=chunk) - Exposure to severe weather events and other catastrophes, such as hurricanes, wildfires, and winter storms, is inherently unpredictable and may materially affect financial results[256](index=256&type=chunk)[257](index=257&type=chunk) [Risks Related to Ownership of Our Common Stock](index=55&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) Risks related to stock ownership include potential price volatility, lack of an active trading market, anti-takeover provisions, and no expected cash dividends - The market price of the company's common stock (HIPO) and warrants (HIPO.WS) may be highly volatile, and an active trading market may not be sustained[281](index=281&type=chunk)[282](index=282&type=chunk) - Provisions in the Certificate of Incorporation and Bylaws, as well as Delaware law and applicable insurance laws, may have anti-takeover effects that could discourage an acquisition[285](index=285&type=chunk)[289](index=289&type=chunk) - The company is an "emerging growth company" and has elected to take advantage of reduced disclosure requirements, which may make its common stock less attractive to some investors[296](index=296&type=chunk) - The company does not currently expect to pay any cash dividends, so a return on investment will depend on stock price appreciation[303](index=303&type=chunk) - Outstanding warrants are exercisable for common stock, which could result in dilution to existing stockholders[311](index=311&type=chunk) [Item 1B. Unresolved Staff Comments](index=63&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the Securities and Exchange Commission - None[317](index=317&type=chunk) [Item 2. Properties](index=63&type=section&id=Item%202.%20Properties) Hippo Holdings Inc. leases all its facilities, including its corporate headquarters in Palo Alto, California, and other office spaces, owning no real property - The company's corporate headquarters are located in Palo Alto, California, and it also leases office space in Austin, TX; Dallas, TX; Bedminster, NJ; Israel; and Poland[318](index=318&type=chunk) - As of December 31, 2021, the company does not own any real property[318](index=318&type=chunk) [Item 3. Legal Proceedings](index=63&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in routine policyholder litigation and a specific civil action, but management does not believe any current litigation will materially affect the business - Hippo and its CEO were named in a civil action by Eyal Navon on November 19, 2021, related to a loan, a call option, and alleged promises made by the CEO[320](index=320&type=chunk) - On March 8, 2022, the court sustained Hippo's demurrer, dismissing all claims against the company without prejudice[321](index=321&type=chunk) [Item 4. Mine Safety Disclosures](index=63&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[322](index=322&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=64&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock and warrants trade on the NYSE, with no cash dividends expected as earnings are retained for business expansion - The company's common stock and warrants trade on the NYSE under the symbols 'HIPO' and 'HIPO WS'[324](index=324&type=chunk) - The company has never declared or paid cash dividends and does not intend to in the foreseeable future[326](index=326&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=65&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2021, Hippo's Total Generated Premium grew **82%** to **$606.1 million** and total revenue increased **77%** to **$91.2 million**, but net loss widened to **$371.4 million** due to non-cash expenses and higher loss adjustment expenses [Overview and Business Model](index=65&type=section&id=Overview%20and%20Business%20Model) Hippo's business model comprises MGA commissions, agency commissions, insurance-as-a-service fees, and earned premium from retained risk, following an asset-light capital approach - Hippo's business model has four key revenue components: MGA commissions, agency commissions, insurance-as-a-service (fronting fees), and earned premium from retained risk[337](index=337&type=chunk)[338](index=338&type=chunk)[339](index=339&type=chunk)[340](index=340&type=chunk) - The company follows an asset-light capital model, retaining approximately **12%** of the premium on its balance sheet for policies written in 2021[342](index=342&type=chunk) [Key Operating and Financial Metrics](index=76&type=section&id=Key%20Operating%20and%20Financial%20Metrics) Key metrics for 2021 show significant growth in Total Generated Premium and Total Revenue, alongside an increased Gross Loss Ratio primarily due to catastrophic events Key Metrics Comparison (2021 vs. 2020, in millions) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total Generated Premium | $606.1 | $333.6 | | Total Revenue | $91.2 | $51.6 | | Net Loss attributable to Hippo | ($371.4) | ($141.5) | | Adjusted EBITDA | ($172.4) | ($90.4) | | Gross Loss Ratio | 138% | 109% | | Net Loss Ratio | 217% | 148% | - Total Generated Premium (TGP) grew **82%** year-over-year, driven by growth in existing states, expansion into five new states, and growth of non-Hippo premium supported by Spinnaker[414](index=414&type=chunk) - The Gross Loss Ratio increased to **138%** in 2021 from **109%** in 2020, primarily due to abnormal catastrophic events, including Texas winter storm Uri, which accounted for **26 percentage points** of the 2021 Gross Loss Ratio[424](index=424&type=chunk)[425](index=425&type=chunk) [Results of Operations](index=81&type=section&id=Results%20of%20Operations) Total revenue increased by **$39.6 million** (77%) in 2021, but net loss widened significantly due to higher loss adjustment expenses and non-cash interest and other expenses Consolidated Results of Operations (in millions) | | Year Ended December 31, | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | | **2021** | **2020** | | | | **Total revenue** | **$91.2** | **$51.6** | **$39.6** | **77%** | | Losses and loss adjustment expenses | $84.4 | $25.3 | $59.1 | 234% | | Sales and marketing | $95.0 | $69.4 | $25.6 | 37% | | Interest and other (income) expense | $198.9 | $26.0 | $172.9 | 665% | | **Net loss attributable to Hippo** | **($371.4)** | **($141.5)** | **($229.9)** | **162%** | - Net earned premium increased by **$21.8 million** (**127%**) year-over-year, driven by the growth of the total book of business and the full-year impact of the Spinnaker acquisition[431](index=431&type=chunk) - Losses and loss adjustment expenses increased by **$59.1 million** (**234%**), primarily due to business growth where risk is retained, higher catastrophic losses, and loss participation clauses in reinsurance treaties[437](index=437&type=chunk) - Interest and other expense increased by **$172.9 million**, mainly due to fair value losses on preferred stock warrants (**$105.4 million**) and the derivative liability on convertible notes (**$54.8 million**) prior to their conversion in the Business Combination[446](index=446&type=chunk) [Liquidity and Capital Resources](index=84&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is primarily from cash and marketable securities, significantly bolstered by approximately **$450 million** in net proceeds from the August 2021 Business Combination and PIPE investment - The company's primary sources of liquidity are its cash and marketable securities, with **$818.7 million** of cash and restricted cash and **$64.0 million** of available-for-sale securities as of December 31, 2021[450](index=450&type=chunk) - In August 2021, the company received net proceeds of approximately **$450 million** from the Business Combination and PIPE Investment[449](index=449&type=chunk) Cash Flow Summary (in millions) | | Year Ended December 31, | | :--- | :--- | :--- | | | **2021** | **2020** | | Net cash used in operating activities | ($124.5) | ($65.4) | | Net cash used in investing activities | ($30.0) | ($2.3) | | Net cash provided by financing activities | $480.8 | $518.1 | [Critical Accounting Policies and Estimates](index=86&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key critical accounting policies and estimates include loss and loss adjustment expense reserves, business combinations, and the fair value of common stock prior to the IPO - Key critical accounting policies and estimates include[457](index=457&type=chunk) - Loss and Loss Adjustment Expense Reserve: Management's best estimate of amounts to be paid for all claims that occurred, including IBNR, which is an inherently uncertain process based on actuarial analysis and various assumptions[460](index=460&type=chunk)[463](index=463&type=chunk) - Business Combinations: Accounting for acquisitions requires significant judgment in determining the fair value of assets acquired and liabilities assumed, with the excess purchase price recorded as goodwill[478](index=478&type=chunk) - Fair Value of Common Stock (pre-IPO): Prior to the Business Combination, the fair value of common stock was determined using various valuation methodologies, including the OPM and PWERM, which involved complex and subjective estimates[488](index=488&type=chunk)[490](index=490&type=chunk)[491](index=491&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=92&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk exposure is to interest rate changes affecting its fixed maturities investments, with an investment strategy prioritizing principal preservation and liquidity - The company is primarily exposed to market risk through its fixed maturities investments[503](index=503&type=chunk) - The investment strategy is to preserve principal, provide liquidity, and then maximize yield without putting principal at risk, as the company does not invest for trading or speculative purposes[503](index=503&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=94&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for 2021 and 2020, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with accompanying notes and the independent auditor's report [Consolidated Financial Statements](index=96&type=section&id=Consolidated%20Financial%20Statements) This section provides key consolidated financial data, including balance sheet and statement of operations figures for 2021 and 2020 Consolidated Balance Sheet Data (in millions) | | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Investments | $64.0 | $56.0 | | Cash and cash equivalents | $775.6 | $452.3 | | Total Assets | $1,642.7 | $979.4 | | Loss and loss adjustment expense reserve | $260.8 | $105.1 | | Total Liabilities | $781.0 | $834.1 | | Total Stockholders' Equity (Deficit) | $861.7 | ($199.5) | Consolidated Statement of Operations Data (in millions) | | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Total Revenue | $91.2 | $51.6 | | Total Expenses | $458.4 | $194.8 | | Net Loss | ($367.9) | ($141.4) | | Net Loss per Share | ($1.36) | ($1.63) | [Notes to Consolidated Financial Statements](index=101&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail significant accounting events, including the August 2021 Business Combination, geographic premium concentration, net operating loss carryforwards, and 2020 acquisitions - The August 2, 2021 Business Combination with RTPZ was accounted for as a reverse recapitalization, with Old Hippo as the accounting acquirer[527](index=527&type=chunk)[538](index=538&type=chunk) - The company's gross written premium is concentrated, with Texas (**29.2%**) and California (**17.9%**) being the largest states by premium in 2021[671](index=671&type=chunk) - As of December 31, 2021, the company had U.S. federal and state net operating loss (NOL) carryforwards of **$372.9 million** and **$136.3 million**, respectively, the use of which may be subject to limitations[746](index=746&type=chunk)[747](index=747&type=chunk) - In 2020, the company acquired Spinnaker Insurance Company for total consideration of **$90.5 million**, resulting in **$32.5 million** of goodwill, and an insurance agency aggregator for **$24.4 million**, resulting in **$13.9 million** of goodwill[752](index=752&type=chunk)[755](index=755&type=chunk)[759](index=759&type=chunk)[760](index=760&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=146&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on any matter of accounting principles, financial disclosure, or auditing scope - None[779](index=779&type=chunk) [Item 9A. Controls and Procedures](index=146&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of December 31, 2021, with no material changes to internal controls during the fourth quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report[781](index=781&type=chunk) - The company is excluding management's report on internal control over financial reporting for the year ended December 31, 2021, due to the timing of the Business Combination[784](index=784&type=chunk) - There were no changes in internal control over financial reporting during the fourth quarter of 2021 that materially affected, or are reasonably likely to materially affect, internal controls[786](index=786&type=chunk) [Item 9B. Other Information](index=147&type=section&id=Item%209B.%20Other%20Information) This section details recent executive promotions and salary adjustments, including Ran Harpaz's promotion to COO and new annual salaries for key officers - On March 8, 2022, Ran Harpaz was promoted to Chief Operating Officer and will continue as Chief Technology Officer with an annual salary of **$500,000**[787](index=787&type=chunk) - Effective March 16, 2022, new annual salaries were approved for CEO Assaf Wand (**$600,000**), President Rick McCathron (**$600,000**), and CFO Stewart Ellis (**$550,000**)[788](index=788&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=148&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2022 Proxy Statement - Information is incorporated by reference to the company's Proxy Statement[791](index=791&type=chunk) [Item 11. Executive Compensation](index=148&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2022 Proxy Statement - Information is incorporated by reference to the company's Proxy Statement[792](index=792&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=148&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the company's 2022 Proxy Statement - Information is incorporated by reference to the company's Proxy Statement[793](index=793&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=148&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's 2022 Proxy Statement - Information is incorporated by reference to the company's Proxy Statement[794](index=794&type=chunk) [Item 14. Principal Accountant Fees and Services](index=148&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's 2022 Proxy Statement - Information is incorporated by reference to the company's Proxy Statement[795](index=795&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=149&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the Form 10-K, including governance documents, material contracts, and required certifications from the CEO and CFO - This item contains a list of all exhibits filed with the Form 10-K, including governance documents, material contracts, and certifications[797](index=797&type=chunk) [Item 16. Form 10-K Summary](index=151&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a summary of the Form 10-K - None[803](index=803&type=chunk)

Financial Data and Key Metrics Changes - Total Generated Premium grew 53% year-over-year to reach $153 million in Q4 and grew 50% year-over-year to $606 million for the full year [28] - Revenue of $32 million in Q4 was up 96% year-over-year [29] - Net loss attributable to Hippo was $60.7 million or $0.11 per share compared to a net loss of $54.1 million or $0.16 per share in the prior year quarter [41] Business Line Data and Key Metrics Changes - The gross loss ratio for Q4 was 89%, the best quarter of the year, benefiting from seasonality and reserve releases [11][32] - Catastrophic losses accounted for 25% of the gross loss ratio, with the largest event being the Marshall fire in Colorado [33] - The company expects to retain approximately 10% of the homeowners' premium that its MGA underwrites on the balance sheets of its insurance company subsidiaries [37] Market Data and Key Metrics Changes - The company is expanding its geographic presence from 37 states and plans to add major states in the northeast [9] - The partnership with home builders is the fastest-growing and most profitable channel, with significant improvements in attach rates [22][58] Company Strategy and Development Direction - The company aims to modernize home insurance and protect homeownership through technology and partnerships [8][45] - A multi-carrier strategy has been introduced to increase pricing flexibility and improve profitability [21] - The company is focused on delivering profitable growth while optimizing loss ratios [88][92] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term prospects despite challenges in the market, including inflation and catastrophic events [17][41] - The company anticipates a gross loss ratio under 100% for the full year 2022, down from 138% in 2021 [42] - Management highlighted the importance of technology in improving underwriting and customer experience [14][19] Other Important Information - The company successfully renewed its reinsurance program, expanding its panel of reinsurers from 9 to 11 [12][35] - The company is investing heavily in technology and development, with expenses increasing to $13.5 million in Q4 [39] - The company has appointed a new Chief Claims Officer to enhance claims service capabilities [16] Q&A Session Summary Question: Can you break down the gross loss ratio of 89%? - Management clarified that the large losses and PCS cat events are mutually exclusive, and the attritional loss ratio includes various factors [47][50] Question: How do you compare the profitability of builder partnerships versus financial services partnerships? - Management explained that builder partnerships are currently more profitable and have higher growth potential due to unique data integration and lower risk profiles [51][58] Question: What is the expected impact of reinsurance renewals on loss ratios? - Management indicated that the ceding commission remains similar to 2021, and they feel confident about the successful renewal despite a hardening market [94] Question: How do you expect retention to be affected by repricing actions? - Management noted that strong retention numbers indicate that customers are satisfied with the service, and they expect this to continue despite rate increases [96][99] Question: What is the expected loss ratio guidance for 2022? - Management expects significant year-over-year improvement in loss ratios, with a target of sub-100 for 2022 [92][88]

Financial Data and Key Metrics Changes - Total Generated Premium (TGP) grew 94% year-over-year to $162 million in Q3 2021, with pro forma growth of 51% year-over-year after the acquisition of Spinnaker [10][14] - Revenue increased 64% year-over-year to $21 million, driven by the growth in TGP [15] - The loss ratio improved to 128% from 155% a year ago, with catastrophic weather losses contributing 50 percentage points to the loss ratio in Q3 [10][16] Business Line Data and Key Metrics Changes - New Total Generated Premium was up 66% year-over-year to $75 million, accelerating from 53% growth last quarter [14] - Premium retention increased to 89%, contributing to top-line growth and improved loss ratio over time [15][32] Market Data and Key Metrics Changes - 63% of new Hippo homeowners' premium in the quarter came from states outside of Texas and California, up from 55% last quarter, indicating geographic diversification [14][31] - The company is seeing strong demand across various distribution channels, particularly in builder and partner channels, which represented over 20% of new premium for the first time [31] Company Strategy and Development Direction - The company is raising its full-year guidance for TGP from $560 million to a range of $600 million to $605 million, reflecting strong performance and expectations of continued momentum [10][20] - A multi-carrier strategy is being implemented to enhance underwriting flexibility and improve loss ratios [22][44] - The company is focusing on geographic diversification to reduce volatility in loss ratios over time [15][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute its growth strategy despite challenges from the pandemic, climate change, and inflation [12][20] - The company believes its tech-driven operating agility positions it better than competitors in an unpredictable environment [12] Other Important Information - The company ended the quarter with cash and cash equivalents of $850 million, indicating a strong capital position [20] - Management highlighted the importance of continuous improvement and quick execution in their operating model [25] Q&A Session Summary Question: Drivers of new business growth - Management noted strong performance across distribution channels, particularly in builder and partner channels, and increased premium retention as key drivers of new business growth [30][31][32] Question: Impact of elevated marketing costs - Management reported improved marketing efficiency, generating more TGP for each dollar spent on sales and marketing, and attributed this to their unique market approach [35][36] Question: Operational changes and partnerships - Management discussed the integration of new data sources and the multi-carrier strategy as part of operational changes aimed at improving loss ratios [42][44] Question: Catastrophe losses and future expectations - Management indicated that catastrophe losses are state-specific and emphasized the importance of pricing each customer based on state conditions to achieve underwriting profit [49][52]

Part I. Financial Information [Item 1. Consolidated Financial Statements](index=6&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents Hippo Holdings Inc.'s unaudited consolidated financial statements as of September 30, 2021, detailing balance sheets, operations, equity changes, cash flows, and notes, including the Business Combination's impact [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Total assets significantly increased to **$1,658.2 million** by September 30, 2021, driven by cash from the Business Combination, while total liabilities decreased, resulting in stockholders' equity turning positive to **$903.7 million** | Financial Metric | September 30, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$1,658.2 million** | **$979.4 million** | | Cash and cash equivalents | $778.7 million | $452.3 million | | **Total Liabilities** | **$754.5 million** | **$834.1 million** | | Convertible promissory notes | $0 | $273.0 million | | **Total Stockholders' Equity (Deficit)** | **$903.7 million** | **($199.5 million)** | [Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company reported a net loss of **$310.7 million** for the nine months ended September 30, 2021, significantly higher than the prior year, driven by increased expenses including fair value adjustments, despite total revenue growing to **$59.1 million** | Metric (in millions) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $21.3 | $13.0 | $59.1 | $35.2 | | Total Expenses | $51.1 | $53.5 | $367.3 | $124.5 | | Net Loss Attributable to Hippo | $(30.9) | $(38.6) | $(310.7) | $(87.4) | | Net Loss Per Share | $(0.08) | $(0.44) | $(1.77) | $(1.02) | [Consolidated Statements of Changes in Stockholders' Equity (Deficit)](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity%20(Deficit)) Stockholders' equity transitioned from a **$199.5 million deficit** at January 1, 2021, to a **$903.7 million positive equity** by September 30, 2021, primarily due to the Business Combination's impact on preferred stock, debt conversion, and paid-in capital - Stockholders' equity increased from a deficit of **($199.5) million** at January 1, 2021 to a positive **$903.7 million** at September 30, 2021[15](index=15&type=chunk) - The significant increase in equity was mainly due to the Business Combination, which included the conversion of convertible preferred stock (**$518.2 million**), conversion of convertible debt (**$434.5 million**), and issuance of common stock in connection with the transaction (**$452.9 million**)[15](index=15&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was **$127.1 million** for the nine months ended September 30, 2021, offset by a **$480.4 million** inflow from financing activities, resulting in a net increase in cash to **$822.8 million** | Cash Flow Activity (in millions) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(127.1) | $(36.3) | | Net cash (used in) provided by investing activities | $(22.9) | $24.8 | | Net cash provided by financing activities | $480.4 | $152.4 | | **Net increase in cash, cash equivalents, and restricted cash** | **$330.4** | **$140.9** | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail accounting policies and financial figures, covering the Business Combination's reverse recapitalization, investments, fair value measurements, reinsurance, and stock-based compensation - The Business Combination with Reinvent Technology Partners Z (RTPZ) on August 2, 2021 was accounted for as a reverse recapitalization, with Old Hippo treated as the accounting acquirer[25](index=25&type=chunk)[50](index=50&type=chunk) - The company received aggregate gross cash consideration of **$587.7 million** from the Business Combination and PIPE investment, resulting in net cash of approximately **$449.3 million** after redemptions, share repurchases, and transaction costs[53](index=53&type=chunk)[54](index=54&type=chunk) - For its primary 2021 reinsurance treaty, the company retains approximately **11%** of the proportional risk, with the remainder ceded to a panel of nine third-party reinsurers[88](index=88&type=chunk) - As of September 30, 2021, Texas (**29.3%**) and California (**18.0%**) represented the largest concentrations of Gross Written Premium for the nine-month period[140](index=140&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=35&type=section&id=Item%202.%20Management's%20Discussion%20And%20Analysis%20Of%20Financial%20Condition%20And%20Results%20Of%20Operations) Management discusses the business model, including MGA, agency, insurance-as-a-service, and risk retention, detailing the impact of acquisitions and the Business Combination, analyzing key performance indicators, operational results, liquidity, and capital resources [Overview and Business Model](index=35&type=section&id=Overview%20and%20Business%20Model) Hippo operates as an integrated home protection platform with a business model encompassing MGA services, agency commissions, insurance-as-a-service, and risk retention, pursuing an asset-light strategy by retaining approximately **11%** of risk for 2021 policies - Hippo's business model is based on four pillars: MGA, Agency, Insurance-as-a-Service, and Risk Retention[148](index=148&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) - The company follows an asset-light capital model, retaining approximately **11%** of the risk for policies written in 2021, with the majority ceded to reinsurers[152](index=152&type=chunk) [Key Factors and Trends Affecting Operating Results](index=39&type=section&id=Key%20Factors%20and%20Trends%20Affecting%20our%20Operating%20Results) Growth is driven by customer acquisition, national expansion into **37 states**, and cross-selling, with operations influenced by seasonality and the August 2020 Spinnaker acquisition, which increased net earned premium and reclassified certain costs - Key growth factors include customer acquisition/retention, national expansion, and cross-selling of additional services[176](index=176&type=chunk)[181](index=181&type=chunk)[184](index=184&type=chunk) - The acquisition of Spinnaker in August 2020 shifted the business model, leading to higher net earned premium and a reclassification of certain acquisition costs[192](index=192&type=chunk)[196](index=196&type=chunk)[198](index=198&type=chunk) [Key Operating and Financial Metrics](index=46&type=section&id=Key%20Operating%20and%20Financial%20Metrics%20and%20Non-GAAP%20Measures) Total Generated Premium grew **94%** YoY to **$161.7 million** in Q3 2021, with the Gross Loss Ratio improving to **128%**, but the Net Loss Ratio increased to **241%** due to higher risk retention, and Adjusted EBITDA loss widened to **$48.4 million** | Metric (in millions) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Generated Premium | $161.7 | $83.2 | $443.5 | $227.6 | | Total Revenue | $21.3 | $13.0 | $59.1 | $35.2 | | Net Loss attributable to Hippo | $(30.9) | $(38.6) | $(310.7) | $(87.4) | | Adjusted EBITDA | $(48.4) | $(23.9) | $(126.4) | $(64.3) | | Gross Loss Ratio | 128% | 155% | 158% | 147% | | Net Loss Ratio | 241% | 185% | 217% | 160% | - Total Generated Premium (TGP) grew **94%** YoY to **$161.7 million** for Q3 2021, driven by growth in existing states, expansion into new states, and growth of non-Hippo premium supported by Spinnaker[231](index=231&type=chunk) - The Gross Loss Ratio for Q3 2021 improved to **128%** from **155%** in Q3 2020, but the Net Loss Ratio increased to **241%** from **185%** due to higher risk retention and loss participation clauses in reinsurance treaties[247](index=247&type=chunk)[250](index=250&type=chunk) [Results of Operations](index=51&type=section&id=Results%20of%20Operations) Total revenue increased **64%** YoY to **$21.3 million** in Q3 2021, driven by a **132%** rise in net earned premium, while total expenses slightly decreased due to a gain on debt extinguishment, and net loss narrowed to **$30.9 million** | Metric (in millions) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Change | | :--- | :--- | :--- | :--- | | Net earned premium | $10.9 | $4.7 | +132% | | Losses and loss adjustment expenses | $26.3 | $8.7 | +202% | | Sales and marketing | $22.4 | $17.6 | +27% | | Interest and other (income) expense | $(26.4) | $0.1 | N/A | | Net loss attributable to Hippo | $(30.9) | $(38.6) | -20% | [Liquidity and Capital Resources](index=55&type=section&id=Liquidity%20and%20Capital%20Resources) The company held **$822.8 million** in cash and restricted cash as of September 30, 2021, bolstered by approximately **$450 million** net proceeds from the Business Combination and PIPE investment, deemed sufficient for future needs despite historical operating losses - The company had **$822.8 million** in cash and restricted cash and **$72.0 million** in investments as of September 30, 2021[282](index=282&type=chunk) - The Business Combination and PIPE Investment provided net proceeds of approximately **$450 million** in August 2021[280](index=280&type=chunk) - For the nine months ended Sep 30, 2021, net cash used in operating activities was **$127.1 million**, while cash provided by financing activities was **$480.4 million**[284](index=284&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk stems from interest rate sensitivity in its fixed-maturity investments, but its short-term, principal-preserving strategy is not expected to materially impact operations or cash flows from sudden rate changes - The company's primary market risk is interest rate risk associated with its portfolio of fixed maturities investments[296](index=296&type=chunk) - The investment strategy prioritizes preserving principal and providing liquidity. Management does not expect interest rate changes to have a material effect due to the portfolio's short-term nature[296](index=296&type=chunk) [Item 4. Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with a prior material weakness in warrant accounting remediated post-Business Combination, and no material changes to internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[298](index=298&type=chunk) - A material weakness related to warrant accounting in the predecessor SPAC (RTPZ) is considered remediated post-Business Combination, and the matters that led to it no longer exist[299](index=299&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=60&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business, aside from routine policyholder claims that are reserved for - The company is not currently party to any legal proceedings expected to have a material adverse effect on the business[303](index=303&type=chunk) [Item 1A. Risk Factors](index=60&type=section&id=Item%201A.%20Risk%20Factors) This section outlines extensive risks across business operations, including historical losses, customer dependence, competition, and reinsurance reliance; industry factors like cyclicality, catastrophe losses, and regulation; and stock ownership risks such as price volatility and anti-takeover provisions [Risks Related to Our Business](index=60&type=section&id=Risks%20Related%20to%20Our%20Business) Business risks include a history of net losses with an accumulated deficit of **$567.3 million**, dependence on customer acquisition and retention, intense competition, challenges in managing growth, and risks related to proprietary technology, third-party data, security incidents, and capital needs - The company has a history of net losses, with an accumulated deficit of **$567.3 million** as of September 30, 2021, and expects losses to increase in the near term due to investments in growth[305](index=305&type=chunk) - The business faces intense competition from traditional, larger insurers with greater name recognition and resources, as well as from other "insurtech" companies[317](index=317&type=chunk)[318](index=318&type=chunk)[321](index=321&type=chunk) - The business model is highly dependent on the availability and pricing of reinsurance, which is subject to market forces and counterparty credit risk[322](index=322&type=chunk) - The company's technology platform and reliance on third-party data present risks, including operational failures, security incidents, and regulatory scrutiny over data usage[335](index=335&type=chunk)[341](index=341&type=chunk)[361](index=361&type=chunk) [Risks Related to Our Industry](index=82&type=section&id=Risks%20Related%20to%20Our%20Industry) The company operates in a cyclical, competitive homeowners' insurance industry exposed to unpredictable catastrophe losses and extensive state-level regulations governing rates, capital, and conduct, with potential harm from inadequate loss reserves - The homeowners' insurance business is cyclical and highly competitive, which can lead to periods of unfavorable premium rates[422](index=422&type=chunk) - The company is exposed to unpredictable severe weather events and other catastrophes, which may be exacerbated by climate change and could lead to losses exceeding reserves and reinsurance limits[445](index=445&type=chunk) - The business is subject to extensive and complex state-level insurance regulations that govern nearly all aspects of operations, including rates, forms, and capital, which could impede growth and profitability[429](index=429&type=chunk)[432](index=432&type=chunk) [Risks Related to Ownership of Our Common Stock](index=90&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) Stock ownership risks include potential price volatility, lack of an active trading market, and dilution from warrants, while anti-takeover provisions and the company's status as an "emerging growth company" also impact investors, with no expected cash dividends - The market price of the company's common stock (HIPO) may be highly volatile[471](index=471&type=chunk) - Outstanding warrants to purchase an aggregate of **9.0 million** shares of common stock will become exercisable, potentially causing dilution to existing stockholders[497](index=497&type=chunk) - Anti-takeover provisions in the company's charter and applicable insurance laws may make a change of control difficult[474](index=474&type=chunk)[476](index=476&type=chunk) - As an "emerging growth company," Hippo has elected to use extended transition periods for new accounting standards, which may make its financials less comparable to other public companies[483](index=483&type=chunk)[485](index=485&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=97&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities or use of proceeds were reported for the period[503](index=503&type=chunk) [Item 3. Defaults Upon Senior Securities](index=97&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported for the period - No defaults upon senior securities were reported for the period[504](index=504&type=chunk) [Item 4. Mine Safety Disclosures](index=97&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) No mine safety disclosures were required - No mine safety disclosures were required[505](index=505&type=chunk) [Item 5. Other Information](index=97&type=section&id=Item%205.%20Other%20Information) No other information was reported under this item - No other information was reported under this item[506](index=506&type=chunk)[507](index=507&type=chunk) [Item 6. Exhibits](index=99&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents and CEO/CFO certifications required by the Sarbanes-Oxley Act - This section lists exhibits filed with the report, including corporate governance documents and officer certifications required under the Sarbanes-Oxley Act[509](index=509&type=chunk)

Q2 2021 Letter to Shareholders Key Highlights from Q2 | --- | --- | --- | --- | --- | --- | --- | |-------|----------------------------------------------------------------------------------------------------------------|-----------------------------------|--------------|----------|-------|-------| | | | | | | | | | | Strong Growth | Total Generated Premium | | | | | | | 101% growth in Total Generated Premium | | | +96% YoY | | | | | Raising annual guidance | +101% YoY | | | | | | | Crossed $500m in Total Ge ...

Call Start: 17:00 January 1, 0000 5:45 PM ET Hippo Holdings Inc. (NYSE:HIPO) Q2 2021 Earnings Conference Call August 16, 2021 17:00 ET Company Participants Chris Maloney - Investor Relations Assaf Wand - Chief Executive Officer Stewart Ellis - Chief Financial Officer Rick McCathron - President Conference Call Participants Christopher Martin - KBW Arvind Ramnani - Piper Sandler Matthew Carletti - JMP Securities Operator Good evening. Thank you for attending the Hippo Holdings Q2 2021 Earnings Conference Call ...

Table of Contents Commission File No. 001-39711 Hippo Holdings Inc. 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, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to (Exact name of registrant as specified in its charter) Delaware 32-0662604 (State or oth ...