Hippo (HIPO) - 2025 Q2 - Quarterly Report

Part I. Financial Information This section provides Hippo Holdings Inc.'s unaudited condensed consolidated financial statements and management's analysis for the periods ended June 30, 2025, and December 31, 2024 Item 1. Condensed Consolidated Financial Statements This section presents Hippo Holdings Inc.'s unaudited condensed consolidated financial statements and related notes for the periods ended June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets This section provides a snapshot of Hippo Holdings Inc.'s financial position as of June 30, 2025, and December 31, 2024, detailing assets, liabilities, and stockholders' equity | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Total assets | $1,706.2 | $1,543.4 | | Total liabilities | $1,372.1 | $1,178.2 | | Total stockholders' equity | $334.1 | $365.2 | - Total assets increased by $162.8 million (10.5%) from December 31, 2024, to June 30, 2025, primarily driven by increases in accounts receivable, reinsurance recoverable, and prepaid reinsurance premiums[13] - Total liabilities increased by $193.9 million (16.4%) over the same period, largely due to increases in unearned premiums, reinsurance premiums payable, and the issuance of a surplus note[13] Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) This section details Hippo's financial performance, including revenue, expenses, and net income (loss) for the three and six months ended June 30, 2025, and 2024 | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $117.3 | $89.6 | $227.6 | $174.7 | | Total expenses | $113.3 | $126.1 | $269.2 | $244.0 | | Net income (loss) attributable to Hippo | $1.3 | $(40.5) | $(46.4) | $(76.2) | | Basic EPS | $0.05 | $(1.64) | $(1.84) | $(3.10) | | Diluted EPS | $0.05 | $(1.64) | $(1.84) | $(3.10) | - For the three months ended June 30, 2025, Hippo reported a net income of $1.3 million, a significant improvement from a net loss of $40.5 million in the prior year, driven by a 31% increase in total revenue and a 10% decrease in total expenses[16] - For the six months ended June 30, 2025, the net loss attributable to Hippo decreased to $46.4 million from $76.2 million in the prior year, reflecting a 30% increase in total revenue and a more moderate 10% increase in total expenses[16] Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in Hippo's stockholders' equity, including common stock, noncontrolling interests, and accumulated other comprehensive income, for the periods presented | Metric (in millions) | Balance at January 1, 2025 | Balance at June 30, 2025 | Balance at January 1, 2024 | Balance at June 30, 2024 | | :------------------- | :------------------------- | :----------------------- | :------------------------- | :----------------------- | | Total Hippo Stockholders' Equity | $362.1 | $332.5 | $377.9 | $322.6 | | Noncontrolling Interests | $3.1 | $1.6 | $6.8 | $4.0 | | Total Stockholders' Equity | $365.2 | $334.1 | $384.7 | $326.6 | - Total Hippo stockholders' equity decreased from $362.1 million at January 1, 2025, to $332.5 million at June 30, 2025, primarily due to net loss and distributions to noncontrolling interests, partially offset by stock-based compensation and common stock issuances[19] - Common stock shares outstanding increased from 24,866,803 at January 1, 2025, to 25,543,053 at June 30, 2025, mainly due to issuances from stock plans[19] Condensed Consolidated Statements of Cash Flows This section presents Hippo's cash flow activities, categorized into operating, investing, and financing, for the six months ended June 30, 2025, and 2024 | Cash Flow Activity (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $(10.9) | $7.1 | | Investing activities | $(32.9) | $30.4 | | Financing activities | $36.8 | $(12.4) | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(7.0) | $25.1 | - Net cash used in operating activities was $10.9 million for the six months ended June 30, 2025, a shift from $7.1 million provided in the prior year, primarily due to increased working capital usage[21][224] - Cash used in investing activities increased significantly to $32.9 million in 2025 from cash provided of $30.4 million in 2024, mainly due to increased purchases of investment securities[21][225] - Cash provided by financing activities was $36.8 million in 2025, a substantial increase from $12.4 million used in 2024, driven by proceeds from a surplus note and common stock issuances[21][226] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of significant accounting policies, investment portfolios, fair value measurements, and segment performance, supporting the condensed consolidated financial statements 1. Description of Business and Summary of Significant Accounting Policies Hippo Holdings Inc. operates as an insurance holding company providing property and casualty insurance, with financial statements prepared under GAAP using estimates for key items - Hippo Holdings Inc. is a Delaware-incorporated insurance holding company with subsidiaries offering property and casualty insurance products to individuals and businesses[23] - The company's interim condensed consolidated financial statements are prepared in accordance with GAAP and involve significant estimates for items such as loss and LAE reserves, fair values of investments, and revenue recognition[24][26] - The company adopted ASU No. 2023-07 (Improvements to Reportable Segment Disclosures) in Q4 2024, which did not have a significant impact, and is evaluating ASU No. 2023-09 and ASU No. 2024-03 for future disclosures[32][33][34] 2. Investments Hippo's investment portfolio, primarily fixed maturities and short-term investments, increased to $405.1 million as of June 30, 2025, with unrealized losses attributed to interest rate changes Investment Portfolio Fair Value | Investment Type (in millions) | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :---------------------------- | :----------------------- | :--------------------------- | | Fixed maturities available-for-sale | $237.3 | $205.7 | | Short-term investments | $167.8 | $167.6 | | Total investments | $405.1 | $373.3 | Unrealized Position of Investments | Unrealized Position (in millions) | June 30, 2025 Gross Unrealized Gains | June 30, 2025 Gross Unrealized Losses | December 31, 2024 Gross Unrealized Gains | December 31, 2024 Gross Unrealized Losses | | :-------------------------------- | :----------------------------------- | :------------------------------------ | :--------------------------------------- | :---------------------------------------- | | Fixed maturities available-for-sale | $2.2 | $(2.0) | $0.9 | $(3.5) | | Short-term investments | $0.0 | $0.0 | $0.0 | $0.0 | - The company determined that unrealized losses are due to the interest rate environment, not creditworthiness, and does not expect to sell investments before recovery or maturity[39][41] Net Investment Income | Net Investment Income (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net investment income | $5.7 | $6.1 | $11.5 | $12.0 | 3. Fair Value Measurement Hippo categorizes financial assets and liabilities at fair value into a three-level hierarchy, with most investments in Level 2 and a contingent consideration liability in Level 3 Financial Assets and Liabilities at Fair Value | Financial Assets (in millions) | Level 1 | Level 2 | Level 3 | Total | | :----------------------------- | :------ | :------ | :------ | :---- | | Cash, cash equivalents, and restricted cash | $225.8 | $— | $— | $225.8 | | Fixed maturities available-for-sale | $33.8 | $203.5 | $— | $237.3 | | Short-term investments | $117.5 | $50.3 | $— | $167.8 | | Total financial assets | $377.1 | $253.8 | $— | $630.9 | | Financial Liabilities (in millions) | Level 1 | Level 2 | Level 3 | Total | | :---------------------------------- | :------ | :------ | :------ | :---- | | Contingent consideration liability | $— | $— | $9.9 | $9.9 | - The contingent consideration liability, related to the 2019 acquisition of North American Advantage Insurance Services, LLC, decreased from $11.7 million at January 1, 2025, to $9.9 million at June 30, 2025, due to payments and fair value changes[49] - During Q2 2025, the contingent consideration liability was reclassified as held for sale[51] 4. Intangible Assets Net intangible assets decreased to $14.3 million as of June 30, 2025, primarily due to amortization and reclassification of assets as held for sale Net Intangible Assets | Intangible Asset (in millions) | June 30, 2025 Net Carrying Amount | December 31, 2024 Net Carrying Amount | | :----------------------------- | :-------------------------------- | :------------------------------------ | | Agency and carrier relationships | $1.4 | $1.6 | | State licenses and domain name | $10.6 | $10.5 | | Customer relationships | $2.3 | $4.7 | | Other | $— | $0.2 | | Total intangible assets, net | $14.3 | $17.0 | - Amortization expense for intangible assets was $0.4 million for Q2 2025 (down from $1.2 million in Q2 2024) and $1.3 million for the six months ended June 30, 2025 (down from $2.4 million in H1 2024)[53] - A portion of intangible assets was reclassified as held for sale during Q2 2025[54] 5. Capitalized Internal Use Software Net capitalized internal use software slightly decreased to $47.2 million as of June 30, 2025, with amortization expense increasing year-over-year Capitalized Internal Use Software | Metric (in millions) | June 30, 2025 | December 31, 2024 | | :------------------- | :------------ | :---------------- | | Capitalized internal use software | $102.8 | $95.0 | | Less: accumulated amortization | $(55.6) | $(46.9) | | Total capitalized internal use software | $47.2 | $48.1 | - Amortization expense for capitalized internal use software was $4.4 million for Q2 2025 (up from $4.1 million in Q2 2024) and $8.7 million for the six months ended June 30, 2025 (up from $8.0 million in H1 2024)[55][57] 6. Other Assets Total other assets increased to $75.3 million as of June 30, 2025, primarily driven by a significant rise in deferred policy acquisition costs Other Assets | Other Asset (in millions) | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Property and equipment | $32.2 | $33.0 | | Deferred policy acquisition costs | $22.3 | $11.6 | | Prepaid expenses | $6.4 | $6.6 | | Claims receivable | $1.2 | $0.8 | | Lease right-of-use assets | $2.1 | $4.7 | | Other | $11.1 | $9.5 | | Total other assets | $75.3 | $66.2 | - Deferred policy acquisition costs, net, increased to $22.3 million as of June 30, 2025, from $11.6 million at December 31, 2024, with amortization of these costs also increasing significantly year-over-year[58] 7. Accrued Expenses and Other Liabilities Total accrued expenses and other liabilities decreased to $77.2 million as of June 30, 2025, largely due to the reclassification of contingent consideration liability as held for sale Accrued Expenses and Other Liabilities | Liability (in millions) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Claim payments outstanding | $19.8 | $19.3 | | Advances from customers | $13.8 | $8.0 | | Premium refund liability | $12.2 | $11.8 | | Lease liability | $6.1 | $10.0 | | Employee related accruals | $5.2 | $5.8 | | Fiduciary liability | $0.5 | $1.8 | | Contingent consideration liability | $— | $11.7 | | Other | $19.6 | $19.0 | | Total accrued expenses and other liabilities | $77.2 | $87.4 | - The contingent consideration liability, previously $11.7 million, was reclassified as held for sale during Q2 2025[59] 8. Surplus Note On June 2, 2025, Hippo issued a $50.0 million surplus note with a 9.5% fixed interest rate and a 15-year term to bolster Spinnaker Insurance Company's capital - A $50.0 million surplus note was issued on June 2, 2025, with a fixed interest rate of 9.5% and a 15-year term, callable in 7 years[61] - The surplus note provides additional statutory capital to support Spinnaker Insurance Company's operational and growth initiatives[61][221] - As of June 30, 2025, the net carrying amount of the surplus note was $47.9 million, after deducting unamortized debt issuance costs of $2.1 million[62] 9. Assets and Liabilities Held for Sale Hippo entered an agreement to sell its homebuilder distribution network for $100 million, with assets and liabilities reclassified as held for sale as of June 30, 2025 - The company agreed to sell its homebuilder distribution network for $100 million ($75 million upfront, $25 million in Q1 2026), with the sale closing on July 1, 2025[63] - A gain of approximately $90.0 million is expected to be recorded in Q3 2025 from the sale[64] Assets and Liabilities Held for Sale | Held for Sale (in millions) | Amount | | :-------------------------- | :----- | | Assets: | | | Cash | $1.6 | | Accounts receivable | $1.5 | | Intangible assets | $1.4 | | Other | $0.2 | | Total Assets | $4.7 | | Liabilities: | | | Contingent consideration liability | $9.9 | | Other | $0.6 | | Total Liabilities | $10.5 | 10. Loss and Loss Adjustment Expense Reserves The net reserve for losses and LAE increased to $129.7 million as of June 30, 2025, with $9.9 million in favorable prior year development for the six-month period Loss and Loss Adjustment Expense Reserves | Metric (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :----------------------------- | :----------------------------- | | Reserve for losses and LAE, net of reinsurance (beginning of period) | $120.1 | $101.1 | | Total incurred (net of reinsurance) | $136.9 | $113.0 | | Total paid (net of reinsurance) | $127.3 | $95.3 | | Reserve for losses and LAE, net of reinsurance (end of period) | $129.7 | $118.8 | | Reserve for losses and LAE gross of reinsurance (end of period) | $389.0 | $346.9 | - Net incurred losses and LAE experienced favorable prior year development of $9.9 million for the six months ended June 30, 2025, primarily from attritional ($8.0 million) and catastrophe ($1.9 million) reserves[68][70] 11. Reinsurance Hippo utilizes a comprehensive reinsurance program to manage risk, strategically retaining more risk for its HHIP while maintaining robust catastrophe protection - Hippo uses a comprehensive reinsurance program (quota share, XOL, catastrophe bonds) with highly rated reinsurers (A.M. Best 'A-' or better) to manage risk and reduce earnings volatility[71][72] - For HHIP, the company has strategically retained more risk by scaling back proportional reinsurance, indicating confidence in its underwriting performance, while maintaining standalone catastrophe XOL protection[74] Reinsurance Metrics | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross Written Premiums | $298.6 | $257.6 | $509.5 | $452.4 | | Ceded Written Premiums | $(191.7) | $(163.8) | $(302.3) | $(249.7) | | Net Written Premiums | $106.9 | $93.8 | $207.2 | $202.7 | | Gross Earned Premiums | $238.5 | $212.2 | $461.3 | $418.9 | | Ceded Earned Premiums | $(144.5) | $(147.8) | $(280.0) | $(294.0) | | Net Earned Premiums | $94.0 | $64.4 | $181.3 | $124.9 | | Gross Loss and LAE Incurred | $87.8 | $123.2 | $299.5 | $244.4 | | Ceded Loss and LAE Incurred | $(43.3) | $(62.8) | $(162.6) | $(131.4) | | Net Loss and LAE Incurred | $44.5 | $60.4 | $136.9 | $113.0 | 12. Geographical Breakdown of Gross Written Premium California remains Hippo's largest state by GWP, though its share decreased, while Florida and New York showed significant GWP growth for the six months ended June 30, 2025 Gross Written Premium by State | State | Six Months Ended June 30, 2025 GWP (in millions) | % of GWP 2025 | Six Months Ended June 30, 2024 GWP (in millions) | % of GWP 2024 | | :--------- | :--------------------------------- | :------------ | :--------------------------------- | :------------ | | California | $97.6 | 19.2% | $100.5 | 22.2% | | Florida | $81.2 | 15.9% | $62.7 | 13.9% | | Texas | $61.9 | 12.1% | $64.4 | 14.2% | | New York | $39.6 | 7.8% | $12.6 | 2.8% | | Illinois | $15.1 | 3.0% | $14.9 | 3.3% | | Massachusetts | $13.3 | 2.6% | $13.7 | 3.0% | | Georgia | $13.6 | 2.7% | $13.6 | 3.0% | | South Carolina | $12.1 | 2.4% | $13.3 | 2.9% | | Louisiana | $10.4 | 2.0% | $11.0 | 2.4% | | Colorado | $11.0 | 2.2% | $9.2 | 2.0% | | Other | $153.7 | 30.1% | $136.5 | 31.2% | | Total | $509.5 | 100.0% | $452.4 | 100.0% | - Florida's GWP increased by 29.5% YoY for the six months ended June 30, 2025, and New York's GWP increased by 214.3% YoY, indicating significant growth in these states[82] 13. Commitments and Contingencies Hippo has $6.6 million in minimum purchase commitments and is involved in routine policyholder litigation, with management not expecting a material adverse effect - Total minimum purchase commitments as of June 30, 2025, are $6.6 million, due over the next three years[83] - The company is routinely involved in litigation from policyholders, with liabilities recorded when an unfavorable outcome is probable and estimable[84][85] - Management does not believe any pending litigation or legal proceedings are likely to have a material adverse effect on the company's business, financial condition, or results of operations[84][85] 14. Stockholders' Equity Hippo's common stock trades on the NYSE, with 1,032,702 stock options outstanding and $36.6 million in unrecognized compensation cost for RSUs and PRSUs - As of June 30, 2025, 1,032,702 stock options were outstanding, with an aggregate intrinsic value of $11.2 million[88] - Total unrecognized compensation cost for unvested RSUs and PRSUs is $36.6 million as of June 30, 2025, expected to be recognized over a weighted-average period of 1.6 years[93] Stock-Based Compensation Expense | Stock-Based Compensation Expense (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total stock-based compensation expense | $7.9 | $11.9 | $15.6 | $20.3 | - On July 1, 2025, the company repurchased 514,309 shares of common stock for $14.5 million, with approximately $18.1 million remaining authorized under the share repurchase program[97][99] 15. Income Taxes Hippo's effective tax rate was 0.2% for H1 2025, primarily due to a full valuation allowance against net deferred tax assets, with $5.2 million in unrecognized tax benefits - The consolidated effective tax rate was 0.2% for the six months ended June 30, 2025, compared to (1.3%) for the prior year, primarily due to a full valuation allowance against net deferred tax assets[100] - As of June 30, 2025, the company had $5.2 million of unrecognized tax benefits, fully offset by a valuation allowance[101] 16. Net Income (Loss) Per Share Attributable to Common Stockholders Net income per share attributable to Hippo was $0.05 for Q2 2025, a significant improvement from a $1.64 loss per share in the prior year Net Income (Loss) Per Share | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to Hippo | $1.3 | $(40.5) | $(46.4) | $(76.2) | | Basic EPS | $0.05 | $(1.64) | $(1.84) | $(3.10) | | Diluted EPS | $0.05 | $(1.64) | $(1.84) | $(3.10) | - Potential common stock shares excluded from diluted EPS computation due to being antidilutive totaled 3,278,521 as of June 30, 2025, including outstanding options, warrants, RSUs, and PRSUs[102] 17. Segments Hippo operates through Services, Insurance-as-a-Service, and Hippo Home Insurance Program segments, with Insurance-as-a-Service showing significant revenue growth and HHIP improving adjusted operating income - Hippo has three reportable segments: Services, Insurance-as-a-Service, and Hippo Home Insurance Program, with financial performance evaluated based on segment adjusted operating income (loss)[103][108] Segment Performance (Q2) | Segment (in millions) | Q2 2025 Revenue | Q2 2025 Adjusted Operating Income (Loss) | Q2 2024 Revenue | Q2 2024 Adjusted Operating Income (Loss) | | :-------------------- | :-------------- | :--------------------------------------- | :-------------- | :--------------------------------------- | | Services | $11.7 | $(3.2) | $12.1 | $(4.5) | | Insurance-as-a-Service | $48.0 | $10.0 | $24.4 | $5.7 | | Hippo Home Insurance Program | $60.6 | $4.8 | $56.2 | $(26.0) | Segment Performance (H1) | Segment (in millions) | H1 2025 Revenue | H1 2025 Adjusted Operating Income (Loss) | H1 2024 Revenue | H1 2024 Adjusted Operating Income (Loss) | | :-------------------- | :-------------- | :--------------------------------------- | :-------------- | :--------------------------------------- | | Services | $23.4 | $(6.7) | $23.5 | $(9.8) | | Insurance-as-a-Service | $86.9 | $9.5 | $44.8 | $10.4 | | Hippo Home Insurance Program | $122.5 | $(33.2) | $111.3 | $(46.2) | - Insurance-as-a-Service revenue increased by 97% for Q2 2025 and 94% for H1 2025, driven by increased premium retention and business growth, despite an increase in loss and LAE due to the LA Wildfires in H1 2025[185][186] - Hippo Home Insurance Program's adjusted operating income significantly improved from a loss of $26.0 million in Q2 2024 to an income of $4.8 million in Q2 2025, primarily due to decreased loss and LAE and increased revenue[187] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Hippo's financial performance, key factors, revenue and expense components, non-GAAP metrics, and a comparative analysis of results for the periods ended June 30, 2025, and 2024 Overview Hippo Holdings Inc. operates as an insurance holding company offering property and casualty insurance through its Services, Insurance-as-a-Service, and HHIP segments, managing risk via reinsurance - Hippo Holdings Inc. operates as an insurance holding company offering property and casualty insurance products to individuals and businesses through three reportable segments: Services, Insurance-as-a-Service, and Hippo Home Insurance Program[120] - The company maintains a comprehensive reinsurance program, including quota share and excess of loss structures, and collateralized protection via catastrophe bonds, to manage risk exposure and reduce earnings volatility[122][123][126] Key Factors and Trends Affecting our Operating Results Hippo's operating results are shaped by customer acquisition and retention, regulatory impacts, fee income expansion, risk management through technology, and seasonal weather patterns - Long-term growth depends on attracting new customers through diversified distribution channels, strategic partnerships, and value-added services, while competing with traditional and tech-driven insurers[127][128][129][135] - Customer retention is crucial for building a recurring revenue base and increasing lifetime value, as retention rates improve with customer cohort age and non-catastrophic loss frequency declines[130][131] - Regulatory actions can restrict premium rates, policy terms, and underwriting standards, limiting the company's ability to manage exposures, particularly to weather-related losses[133] - The company aims to expand fee income and premium through cross-selling non-homeowner insurance products and offering incremental home protection services, which are expected to generate revenue and reduce loss ratios[134][136][137] - Risk management relies on leveraging data, technology, and geographic diversity to improve underwriting, reduce loss frequency, and lower loss ratios, with seasonal weather patterns significantly impacting claims[138][139] Components of Results of Operations This section defines key revenue components, including Gross Written Premium and Net Earned Premium, and outlines expense categories such as Loss and Loss Adjustment Expenses and Insurance-Related Expenses - Revenue components include Gross Written Premium (influenced by new business, renewals, and policy size/rate), Ceded Written Premium (reduction from gross premium due to reinsurance), Net Earned Premium (earned portion of gross less ceded), Commission Income (agency, ceding, fronting, MGA fees), Service and Fee Income (policy fees, other revenue), and Net Investment Income (interest from investments, realized gains/losses)[140][141][142][143][144][145][146] - Expense categories include Loss and Loss Adjustment Expenses (costs of insured claims, net of reinsurance, influenced by catastrophes, non-catastrophe claims, underwriting mix, reinsurance terms, legal/regulatory changes, inflation, and litigation trends)[147] - Other expenses include Insurance-Related Expenses (acquisition costs, premium taxes, employee compensation, software amortization, underwriting/claims service costs), Technology and Development (staff compensation, infrastructure, actuarial, third-party services), Sales and Marketing (commissions, advertising, employee costs), General and Administrative (finance, HR, legal, management, facilities, professional services), Impairment and Restructuring Charges (lease impairments, severance), and Income Taxes (asset/liability method, valuation allowance)[148][149][150][151][152][154][155] Key Operating and Financial Metrics and Non-GAAP Measures Hippo discontinued Total Generated Premium, focusing on GWP and Net Earned Premium, and introduced Adjusted Net Income as a new non-GAAP measure to provide clearer insights into performance - Hippo discontinued reporting Total Generated Premium (TGP) in Q1 2025, shifting focus to Gross Written Premium (GWP), Net Earned Premium, and Commission Income, which better reflect core operating drivers[159][160] - Adjusted Net Income was introduced in Q2 2025 as a non-GAAP measure, excluding items not indicative of underlying business trends, to provide useful insight into operating results[162][166] Key Operating and Financial Metrics | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross Written Premium | $298.6 | $257.6 | $509.5 | $452.4 | | Total Revenue | $117.3 | $89.6 | $227.6 | $174.7 | | Net Income (Loss) attributable to Hippo | $1.3 | $(40.5) | $(46.4) | $(76.2) | | Adjusted Net Income (Loss) | $17.0 | $(19.5) | $(18.1) | $(33.7) | | Adjusted EBITDA | $11.8 | $(24.9) | $(29.3) | $(44.7) | | Gross Loss Ratio | 37% | 58% | 65% | 58% | | Net Loss Ratio | 47% | 94% | 75% | 91% | - Adjusted Net Income for Q2 2025 was $17.0 million (vs. $(19.5) million loss in Q2 2024), and Adjusted EBITDA for Q2 2025 was $11.8 million (vs. $(24.9) million loss in Q2 2024), both showing significant improvements driven by a decrease in net loss ratio[167][171] - The Gross Loss Ratio improved to 37% in Q2 2025 (from 58% in Q2 2024) and the Net Loss Ratio improved to 47% (from 94%), primarily due to lower catastrophe losses and benefits from pricing and underwriting actions[175][179] Comparison of the Three and Six Months Ended June 30, 2025 and 2024 Hippo saw a 31% increase in total revenue for Q2 2025, driven by higher net earned premium, while sales and marketing expenses significantly decreased due to lower employee-related costs Revenue Comparison | Metric (in millions) | Q2 2025 | Q2 2024 | Change (QoQ) | % Change (QoQ) | H1 2025 | H1 2024 | Change (YoY) | % Change (YoY) | | :------------------- | :------ | :------ | :----------- | :------------- | :------ | :------ | :----------- | :------------- | | Total revenue | $117.3 | $89.6 | $27.7 | 31% | $227.6 | $174.7 | $52.9 | 30% | | Net earned premium | $94.0 | $64.4 | $29.6 | 46% | $181.3 | $124.9 | $56.4 | 45% | | Commission income, net | $14.7 | $16.1 | $(1.4) | (9)% | $29.1 | $32.0 | $(2.9) | (9)% | | Service and fee income | $2.9 | $3.0 | $(0.1) | (3)% | $5.7 | $5.8 | $(0.1) | (2)% | | Net investment income | $5.7 | $6.1 | $(0.4) | (7)% | $11.5 | $12.0 | $(0.5) | (4)% | - Net earned premium increased by 46% in Q2 2025 and 45% in H1 2025, primarily due to higher retention of earned premium in the Insurance-as-a-Service segment[194][195] Expense Comparison | Expense (in millions) | Q2 2025 | Q2 2024 | Change (QoQ) | % Change (QoQ) | H1 2025 | H1 2024 | Change (YoY) | % Change (YoY) | | :-------------------- | :------ | :------ | :----------- | :------------- | :------ | :------ | :----------- | :------------- | | Losses and loss adjustment expenses | $44.5 | $60.4 | $(15.9) | (26)% | $136.9 | $113.0 | $23.9 | 21% | | Insurance related expenses | $32.8 | $24.5 | $8.3 | 34% | $63.0 | $45.3 | $17.7 | 39% | | Technology and development | $8.1 | $7.8 | $0.3 | 4% | $16.2 | $16.1 | $0.1 | 1% | | Sales and marketing | $9.2 | $13.4 | $(4.2) | (31)% | $18.1 | $27.8 | $(9.7) | (35)% | | General and administrative | $17.4 | $19.9 | $(2.5) | (13)% | $33.9 | $38.2 | $(4.3) | (11)% | | Impairment and restructuring charges | $1.2 | $— | $1.2 | 100% | $1.2 | $3.6 | $(2.4) | (67)% | - Losses and loss adjustment expenses decreased by 26% in Q2 2025 due to lower catastrophe and non-PCS losses, but increased by 21% in H1 2025, primarily due to the $42.3 million impact of the LA Wildfires[204][205] - Sales and marketing expenses decreased significantly by 31% in Q2 2025 and 35% in H1 2025, driven by lower employee-related costs (including stock-based compensation), reduced amortization of acquired intangible assets, and decreased advertising costs[210][211] Liquidity and Capital Resources Hippo's liquidity includes $198.9 million in cash and $405.1 million in investments, supplemented by a $50.0 million surplus note to support Spinnaker's growth - As of June 30, 2025, liquidity sources included $198.9 million in cash, $26.9 million in restricted cash, and $405.1 million in available-for-sale fixed income securities and short-term investments[220] - The company has $42.5 million in secured borrowing capacity from the Federal Home Loan Bank (FHLB) of New York, with no outstanding amounts[221] - A $50.0 million surplus note was issued on June 2, 2025, to provide additional statutory capital and support Spinnaker's operational and growth initiatives[221] Cash Flow Activity | Cash Flow Activity (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $(10.9) | $7.1 | | Investing activities | $(32.9) | $30.4 | | Financing activities | $36.8 | $(12.4) | - Cash used in operating activities was $10.9 million for H1 2025, a change of $18.0 million from cash provided in H1 2024, primarily due to increased working capital usage[224] Critical Accounting Policies and Estimates Hippo's financial statements rely on significant estimates for revenue, loss reserves, deferred tax assets, and intangible assets, with no material changes in policies during H1 2025 - The preparation of financial statements requires significant estimates and judgments, particularly for revenue, loss and loss adjustment expense reserves, recoverability of net deferred tax assets, and intangible assets[229] - No material changes occurred to the critical accounting policies during the six months ended June 30, 2025, compared to those outlined in the Annual Report on Form 10-K[230] Recent Accounting Pronouncements Information regarding recent accounting pronouncements is incorporated by reference from Note 1 to the condensed consolidated financial statements - Information on recent accounting pronouncements is detailed in Note 1 to the condensed consolidated financial statements[231] Emerging Growth Company Status Hippo qualifies as an "emerging growth company" under the JOBS Act, allowing it to adopt new accounting guidance using private company timelines until December 31, 2025 - Hippo qualifies as an "emerging growth company" under the JOBS Act, allowing it to adopt new or revised accounting guidance using the same time periods as private companies[232] - The company will cease to be an emerging growth company on December 31, 2025, which is the last day of the fiscal year following the fifth anniversary of its initial public offering[234] Item 3. Quantitative and Qualitative Disclosures About Market Risk Hippo is exposed to interest rate risks affecting its investments, with a strategy prioritizing principal preservation and liquidity, and no material impact expected from sudden rate changes - Hippo is exposed to market risks related to interest rate changes, which can affect the market values and yields of its fixed maturities, short-term investments, and cash and cash equivalents[235][236] - The company's investment strategy prioritizes principal preservation, liquidity for operating and capital needs, and then maximizing yield without risking principal[236] - Management does not expect a material effect on its results of operations or cash flows from a sudden 10% change in market interest rates as of June 30, 2025[236] Item 4. Controls and Procedures Hippo's CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that Hippo's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely and accurate reporting of information[237] - Management acknowledges that controls provide only reasonable assurance and require judgment in balancing benefits against costs[238] - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter[239] Part II. Other Information This section covers legal proceedings, risk factors, equity security sales, and other miscellaneous information for Hippo Holdings Inc Item 1. Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 13, Commitments and Contingencies, in the notes to the condensed consolidated financial statements - Details on legal proceedings are incorporated by reference from Note 13, Commitments and Contingencies, in the notes to the condensed consolidated financial statements[240] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024, have occurred[241] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, Hippo did not purchase any shares under its repurchase program, with $32.6 million remaining available for future repurchases Share Repurchase Activity | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :---------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :--------------------------------------------------------------------------------- | | April 1 through April 30, 2025 | — | $— | — | | | May 1 through May 31, 2025 | — | $— | — | | | June 1 through June 30, 2025 | — | $— | — | | | Total | — | | | $32.6 | - No share repurchases were made during the three months ended June 30, 2025, under the company's existing share repurchase program[243] - As of June 30, 2025, $32.6 million of common stock remained available for repurchase under the program[243] Item 3. Defaults Upon Senior Securities This item is not applicable to the company - This section is not applicable[244] Item 4. Mine Safety Disclosures This item is not applicable to the company - This section is not applicable[245] Item 5. Other Information Hippo's Chief Financial Officer, Guy Zeltser, adopted a Rule 10b5-1 trading arrangement on June 18, 2025, for the sale of 7,101 shares Rule 10b5-1 Trading Arrangements | Name and Position | Action | Date | Trading Arrangement Rule 10b5-01 | Non-Rule 10b5-01 | Total Shares to be Sold | Expiration Date | | :------------------------ | :----- | :--------- | :------------------------------- | :--------------- | :---------------------- | :-------------- | | Guy Zeltser (Chief Financial Officer) | Adopt | 6/18/2025 | X | — | 7,101 | 9/1/2026 | - Officers and directors may enter into Rule 10b5-1 or non-Rule 10b5-1 trading arrangements[246] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including director compensation, CEO/CFO certifications, and XBRL interactive data files - Exhibits include the Hippo Holdings Inc. Non-Employee Director Compensation Program (10.1), CEO and CFO certifications under Sarbanes-Oxley Act Sections 302 (31.1, 31.2) and 906 (32.1, 32.2), and various XBRL taxonomy extension documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[247] Signatures The report was duly signed on August 6, 2025, by Richard McCathron, CEO, and Guy Zeltser, CFO, pursuant to the Securities Exchange Act of 1934 - The report was signed on August 6, 2025, by Richard McCathron, Chief Executive Officer, and Guy Zeltser, Chief Financial Officer[250]