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Jun 30, 2024
Hippo Holdings Q2 2024 Earnings Report
Hippo showcased substantial loss ratio improvements and revenue growth, demonstrating progress towards profitability.
Key Takeaways
Hippo Holdings reported strong Q2 2024 results, highlighted by significant improvements in the HHIP gross and net loss ratios, driven by proactive measures to manage exposure to severe weather. The company also achieved substantial revenue growth, driven by its Services and IaaS segments, and demonstrated operating leverage by reducing expenses as a percentage of revenue. Hippo is on track to achieve positive adjusted EBITDA by the end of the year.
Revenue increased by 88% year-over-year to $90 million, driven by higher premium retention and volume increases in the IaaS and Services segments.
HHIP gross loss ratio improved by 94 percentage points year-over-year to 84%.
Sales & Marketing, Technology & Development, and General & Administrative expenses collectively declined from 120% of revenue a year ago to 46% in Q2, a reduction of $16 million year-over-year.
Net loss attributable to Hippo decreased by 62% year-over-year to $41 million.
Hippo Holdings
Hippo Holdings
Forward Guidance
Hippo expects TGP growth to re-accelerate, revenue to continue to grow faster than TGP, PCS CAT weather losses to decline significantly, non-weather loss ratio to improve significantly, fixed costs to remain roughly in line with Q2 levels, and minimum cash and investments, excluding restricted cash, to be more than $450 million when they turn adjusted EBITDA positive in Q4.
Positive Outlook
- TGP growth to re-accelerate as adjustments to exposure in high-CAT geographies are completed and as the growth in our new homes channel is no longer offset by reductions in other areas of our portfolio; this will start in Q3, but will be much more meaningful in Q4
- Revenue to continue to grow faster than TGP as policies written in 2023 continue to renew onto our new reinsurance structure and we are able to benefit from the full monetization of the risk we are retaining
- PCS CAT weather losses to decline significantly off their seasonal peak in Q2
- Non-weather loss ratio to improve significantly as previous rate action earns in and is no longer offset by the mix-shift away from higher-volatility, higher-premium policies toward lower-volatility, lower-premium policies
- Fixed costs to remain roughly in line with Q2 dollar levels, even as our top line continues to grow, aided by significant improvements in our efficiency that have been enabled by our technology platform
Challenges Ahead
- The company's adjusted EBITDA loss widened by $5 million quarter over quarter, driven by a $12 million quarter over quarter seasonal increase in Gross PCS CAT losses in HHIP, offset by improvements in other areas of the business.
- Seasonal weather exposure associated with wind and hail in the Midwest
- Slightly higher than expected losses from wind and hail
- Temporary, mix-shift driven pressure on non-PCS loss ratio due to the reduction of policies in high-CAT geographies
- PCS CAT weather losses to decline significantly off their seasonal peak in Q2