Hippo (HIPO)2024-11-08 22:56Financial Data and Key Metrics - Total Generated Premium (TGP) grew 21% YoY to $368 million in Q3 2024 [16] - Revenue increased 65% YoY to $95 million, up from $58 million in Q3 2023 [18] - Net loss improved by 84% YoY to $8.5 million, driven by a 67 percentage point improvement in the HHIP net loss ratio and better operating leverage [27] - Adjusted EBITDA loss improved by 81% YoY to $7.5 million [28] - Cash and investments increased by $54 million QoQ to $545 million, driven by higher reinsurance collections and proceeds from the sale of a shell insurance carrier [29] Business Line Performance - TGP in the Hippo Home Insurance Program (HHIP) segment declined 18% YoY due to reduced exposure to high-CAT geographies [16] - TGP in the Insurance-as-a-Service segment grew 12% YoY, while the Services segment saw 46% TGP growth [16] - The Services and Insurance-as-a-Service segments accounted for 81% of total TGP, up from 74% a year ago [17] - HHIP non-PCS accident period loss ratio improved by 15 percentage points YoY to 52%, driven by aggressive rate and underwriting actions [21] - Total HHIP accident period loss ratio improved by 22 percentage points YoY to 70% [23] Market and Geographic Performance - The company expanded its New Homes program in California, Florida, and Texas, adding new builder partners Perry Homes and Van Daele [10] - By year-end, the company expects to provide insurance access for nearly 50,000 new homes annually in these states [11] - The company has access to approximately 200,000 new homes annually through existing partners, with an addressable market of 1.5 million new homes expected in 2025 [37] Strategic Direction and Industry Competition - The company sold a majority stake in First Connect Insurance Services for $48 million, with potential additional proceeds of up to $12 million based on performance targets [11][31] - The transaction allows the company to focus on its core business while enabling First Connect to invest in its growth [12][32] - The company repurchased and retired 957,242 shares, representing 3.8% of total shares outstanding, using proceeds from the First Connect sale [33] - The company is prioritizing the remediation of its legacy HHIP portfolio while accelerating growth in new builder channels [45] Management Commentary on Operating Environment and Future Outlook - Management highlighted significant improvements in loss ratios and operating leverage, driven by strategic investments and underwriting actions [8][15] - The company expects Q4 2024 revenue of $95 million to $99 million and adjusted EBITDA of $5 million to $6 million, despite the impact of Hurricane Milton [35] - Management remains optimistic about the company's path to profitability and future growth opportunities [13][49] Other Important Information - The company referred to non-GAAP financial measures such as TGP and adjusted EBITDA, with reconciliations provided in the shareholder letter [7] - The sale of First Connect will lower Q4 TGP by $50 million to $60 million and revenue by $1.5 million to $1.8 million, with a negligible impact on net loss and adjusted EBITDA [34] Q&A Session Summary Question: Entry into California, Florida, and Texas homebuilder markets - The company clarified that it is not entering these states but expanding partnerships with additional homebuilders in these regions [36] - The company has access to approximately 200,000 new homes annually and expects an addressable market of 1.5 million new homes in 2025 [37] Question: Retention rates and loss ratios in the homebuilders' channel - Retention rates are high, with policies transitioning from new construction to traditional homeowner policies as homes age [38] - Early data suggests new homes have better loss ratios than older homes, particularly in non-weather losses [39] Question: Impact of First Connect sale on EBITDA - The sale has a small positive impact on adjusted EBITDA, as First Connect was not yet profitable [40] Question: Rationale for selling the shell insurance carrier - The sale involved a dormant asset, Mainsail, which was redundant given the company's other assets [43][44] Question: Growth outlook for HHIP and other segments - The company is focused on remediating the legacy HHIP portfolio while writing new business in areas with favorable loss ratios [45] - Growth in the Insurance-as-a-Service and Services segments is expected to outpace HHIP in the near term [46] Question: Share repurchase strategy - The company repurchased shares opportunistically using proceeds from the First Connect sale and may continue to explore buybacks as it approaches profitability [47]