Hippo Holdings Inc
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
HIPO$34.89+0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-02.
0001828105-24-000027
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001828105-24-000036
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 186 previous paragraphs and 209 current paragraphs.
145 unchanged; 36 reworded; 19 added; 5 removed; 0 previous and 9 current paragraphs rearranged.
Tables are not compared: 13 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (19)
Current report
Other (Income) Expense, net
Current report
For the three months ended June 30, 2024, our Gross Loss Ratio was 58% net of a prior year favorable development of 5 percentage points relating to PCS events compared with 107% net of a prior year favorable development of 6 percentage points relating to Non-PCS events and 4 percentage points relating to PCS events for the three months ended June 30, 2023. The decrease reflected the benefits of the pricing and underwriting actions we have taken and due to a lower impact from PCS events. We expect continued improvement as these actions have more time to impact our financial results.
Current report
For the three months ended June 30, 2024, our net loss ratio was 94% net of a prior year favorable development of 3 percentage points relating to PCS events compared with 344% net of a prior year favorable development of 7 percentage points relating to Non-PCS events and 4 percentage points relating to PCS events for the three months ended June 30, 2023. The decrease reflected the benefits of the pricing and underwriting actions we have taken, including a reduction of loss participation features in our reinsurance treaties, higher retention of earned premium due to our 2023 and 2024 reinsurance treaties, and a lower impact from PCS events. We expect continued improvement as these actions have more time to impact our financial results.
Current report
For the six months ended June 30, 2024, our net loss ratio was 91% net of a prior year favorable development of 2 percentage points relating to PCS events compared with 317% net of a prior year favorable development of 3 percentage points relating to Non-PCS events and 3 percentage points relating to PCS events for the six months ended June 30, 2023. The decrease reflected the benefits of the pricing and underwriting actions we have taken, including a reduction of loss participation features in our reinsurance treaties, higher retention of earned premium due to our 2023 and 2024 reinsurance treaties, and a lower impact from PCS events. We expect continued improvement as these actions have more time to impact our financial results.
Current report
For the six months ended June 30, 2024, our Services segment, which earns fees and/or commission income without assuming underwriting risk or need for reinsurance, had Total Generated Premium of $297.0 million, an increase of 38% from $216.0 million over the prior year period, while revenue was $23.5 million, an increase of 11% from $21.2 million over the prior year period. The growth was driven primarily due to the growth in the total book of business in our aggregator channel, as well as in our builder channel for new and renewal business, as we maintain higher retention rates and experienced premium rate increases. Our adjusted operating loss was $9.8 million, a decrease of 52% compared to a loss of $20.6 million in the prior year period, due primarily to lower adjusted operating expenses including a decrease in advertising costs, and an increase in revenue as noted above.
Current report
For the three months ended June 30, 2024 and 2023, $7.9 million and $8.5 million, respectively, was offset against earned premium for XOL. Adjusted operating loss was $26.0 million in the quarter, a decrease of 68% compared to a loss of $82.2 million in the prior year quarter. The decrease in adjusted operating loss was due primarily to the increase in revenue noted above and an improvement in our net loss ratio due to improved terms on our reinsurance treaties and a lower impact of PCS events. This was partially offset by an increase in insurance related expenses due to higher premium retention.
Current report
For the three months ended June 30, 2024, HPGLR was 84% net of a prior year favorable development of 15 percentage points relating to PCS events and 178% net of a prior year favorable development of 5 percentage points relating to Non-PCS events and 2 percentage points relating to PCS events. The decrease reflected the benefits of the pricing and underwriting actions we have taken and a lower impact from PCS events. We expect continued improvement as these actions have more time to impact our financial results.
Current report
For the six months ended June 30, 2024, HPGLR was 82% net of a prior year favorable development of 7 percentage points relating to PCS events and 140% net of a prior year favorable development of 2 percentage points relating to Non-PCS events and 1 percentage points relating to PCS events, The decrease reflected the benefits of the pricing and underwriting actions we have taken and a lower impact from PCS events. We expect continued improvement as these actions have more time to impact our financial results.
Current report
For the six months ended June 30, 2024, service and fee income was $5.8 million, a decrease of $1.2 million, or 16%, compared to $7.0 million for the six months ended June 30, 2023. The decrease was due primarily to a decrease in policy fees and fee sharing arrangements.
Current report
For the six months ended June 30, 2024, loss and loss adjustment expenses were $113.0 million, a decrease of $1.4 million, compared to $114.4 million for the six months ended June 30, 2023. The decrease was due primarily to an improvement in our net loss ratio due to improved terms on our reinsurance treaties and a lower impact of PCS events, which is partially offset by an increase in losses due to higher premium retention rates and the growth of our book of business.
Current report
For the six months ended June 30, 2024, insurance related expenses were $45.3 million, an increase of $10.8 million, or 31%, compared to $34.5 million for the six months ended June 30, 2023. The increase was due primarily to an increase in amortization of deferred direct acquisition costs of $11.2 million due to higher premium retention rates and the growth of our book of business. This was partially offset by a decrease in underwriting costs.
Current report
For the six months ended June 30, 2024, technology and development expenses were $16.1 million, a decrease of $8.6 million, or 35%, compared to $24.7 million for the six months ended June 30, 2023. The decrease was due primarily to a decrease in employee-related costs of $8.7 million, including a decrease in stock-based compensation of $3.7 million, driven by a decrease in headcount.
Current report
For the six months ended June 30, 2024, sales and marketing expenses were $27.8 million, a decrease of $17.2 million, or 38%, compared to $45.0 million for the six months ended June 30, 2023. The decrease was due primarily to a decrease in advertising costs of $5.4 million and a decrease in employee-related costs of $5.8 million, including a decrease stock-based compensation of $3.3 million due to a decrease in headcount. The decrease was also due to the change in fair value of contingent consideration of $1.7 million and decrease in commission expense of $1.3 million.
Current report
For the six months ended June 30, 2024, general and administrative expenses were $38.2 million, a decrease of $3.1 million, or 8%, compared to $41.3 million for the six months ended June 30, 2023. The increase was due primarily to a decrease in stock-based compensation of $4.8 million, partially driven by a charge due to the repricing of options during the first half of 2023, and a decrease in corporate insurance of $1.6 million. This was partially offset by an increase in legal costs of $2.9 million.
Current report
For the three months ended June 30, 2024 and 2023, there were no impairment or restructuring charges.
Current report
Other (Income) Expense, net
Current report
For the three months ended June 30, 2024, other expense, net was $0.1 million compared to $0.0 million for the three months ended June 30, 2023.
Current report
For the six months ended June 30, 2024, income tax expense was $1.0 million, an increase of $0.5 million compared to $0.5 million for the six months ended June 30, 2023.
Current report
For the six months ended June 30, 2024, net loss attributable to Hippo was $76.2 million, a decrease of $101.5 million compared to $177.7 million for the six months ended June 30, 2023 due to the factors described above.
Removed paragraphs (5)
Previous report
Other (Income) Expense
Previous report
For the three months ended March 31, 2024, our net loss ratio was 87% compared with 273% for the three months ended March 31, 2023. The decrease from prior year was due primarily to the positive impact of our underwriting and pricing actions on our Non-PCS losses, the increase in our net earned premium as a result of higher premium retention on our 2023 and 2024 reinsurance treaties, a decrease in PCS catastrophic weather and other weather loss experience and our loss participation features, and the growth of our book of business. There was no material PCS or non-PCS prior year developments in the current quarter. The prior year quarter includes 3 percentage points of net adverse developments for non-PCS events and 1 percentage point net favorable developments for PCS events.
Previous report
For the three months ended March 31, 2024 HPGLR was 80% compared to 101% in the prior year. The decrease for the three-month period reflected the benefits of the pricing and underwriting actions we have taken, as well as a lower number of catastrophes in the first quarter of the current year compared to the prior year.
Previous report
This was partially offset by an improvement in our net loss ratio due to improved terms on our reinsurance treaties, and a lower number of catastrophes in the first quarter of the current year compared to the prior year.
Previous report
Other (Income) Expense
Reworded paragraphs (36)
Previous wording
In May 2023, we secured new catastrophe protection through a per occurrence XOL reinsurance agreement with Mountain Re Ltd. (“Mountain Re”), an independent Bermuda company, licensed as a Special Purpose Insurer. The reinsurance agreement meets the requirements to be accounted for as reinsurance in accordance with the guidance for reinsurance contracts. In connection with the reinsurance agreement, Mountain Re issued notes (generally referred to as “catastrophe bonds”) to investors, consistent with the amount of coverage provided under the reinsurance agreement. The reinsurance agreement provides us with coverage through June 2026, and pursuant to the agreement, Mountain Re provides XOL reinsurance coverage to us for losses from a variety of perils, including named storms, fire following an earthquake, severe thunderstorms, and winter storms on business produced through the Hippo MGA. Under the terms of the reinsurance agreement, we are obligated to pay annual reinsurance premiums to Mountain Re for the reinsurance coverage. Amounts payable under the reinsurance agreement with respect to any covered event cannot exceed our actual losses from such event.
Current wording
In May 2023, we secured new catastrophe protection through a per occurrence XOL reinsurance agreement with Mountain Re Ltd. (“Mountain Re”), an independent Bermuda company, licensed as a Special Purpose Insurer. The reinsurance agreement meets the requirements to be accounted for as reinsurance in accordance with the guidance for reinsurance contracts. In connection with the reinsurance agreement, Mountain Re issued notes (generally referred to as “catastrophe bonds”) to investors, consistent with the amount of coverage provided under the reinsurance agreement. The reinsurance agreement provides us with coverage through June 2026, and pursuant to the agreement, Mountain Re provides XOL reinsurance coverage to us for losses from a variety of perils, including named storms, fire following an earthquake, severe thunderstorms, and winter storms on business produced through the Hippo MGA. Under the terms of the reinsurance agreement, we are obligated to pay annual reinsurance premiums to Mountain Re for the reinsurance coverage which inures to the benefit of our traditional
Previous wording
Our XOL program provides us protection from catastrophes that could impact a large number of insurance policies. We buy XOL so that the probability of losses from a single occurrence exceeding the protection purchased is no more than 0.4%, or equivalent to a 1 in 250-year return period when considered with the corporate catastrophe and Florida Hurricane Catastrophe Fund (the “FHCF”) XOL described below under “Other Reinsurance”. This reinsurance protects us from all but the most severe catastrophic events.
Current wording
Our XOL program provides us protection from catastrophes that could impact a large number of insurance policies. We buy XOL so that the probability of losses from a single occurrence exceeding the protection purchased is no more than 0.4%, or equivalent to a 1 in 250-year return period when considered with the Mountain Re per occurrence, described above, corporate catastrophe, and Florida Hurricane Catastrophe Fund (the “FHCF”) XOL described below under “Other Reinsurance.” This reinsurance protects us from all but the most severe catastrophic events.
Previous wording
Spinnaker also purchased reinsurance for programs written by MGAs other than Hippo through our Insurance-as-a-Service business. The reinsurance treaties are a mix of proportional and XOL in which generally 80% to 100% of the risk, up to the 1 in 250-year return period, is ceded. The reinsurance contracts are subject to variable commission adjustments and loss participation features, including loss caps, which may increase the amount of losses retained by us in excess of our pro-rata participation. Such provisions are recognized in the period based on the experience to date under the agreement.
Current wording
Spinnaker also purchased reinsurance for programs written by MGAs other than Hippo through our Insurance-as-a-Service business. The reinsurance treaties are a mix of proportional and XOL in which generally 75% to 100% of the risk, up to the 1 in 250-year return period, is ceded. The reinsurance contracts are subject to variable commission adjustments and loss participation features, including loss caps, which may increase the amount of losses retained by us in excess of our pro-rata participation. Such provisions are recognized in the period based on the experience to date under the agreement.
Previous wording
Other (income) expense primarily consists of certain fair value adjustments and other non-operating income expenses.
Current wording
Other (income) expense, net primarily consists of certain fair value adjustments and other non-operating income expenses.
Previous wording
Our Total Generated Premium for the three months ended March 31, 2024 grew 20% year-over-year to $293.5 million from $244.9 million for the three months ended March 31, 2023. The growth was driven primarily by the growth of non-Hippo written premium supported by our Insurance-as-a-Service business, the growth in the total book of business in our aggregator channel, as well as in our builder channel for new and renewal business, as we maintain higher retention rates and experienced premium rate increases. This was partially offset by a decrease in our Hippo Home Insurance Program (“HHIP”) as we have taken actions to reduce our exposure to wind and hail while achieving planned premium rate increases.
Current wording
Our Total Generated Premium for the three months ended June 30, 2024 grew 20% year-over-year to $380.1 million from $317.6 million for the three months ended June 30, 2023. The growth was driven primarily by the growth of non-Hippo written premium supported by our Insurance-as-a-Service business, the growth in the total book of business in our aggregator channel, as well as in our builder channel for new and renewal business, as we maintain higher retention rates and experienced premium rate increases. This was partially offset by a decrease in our Hippo Home Insurance Program (“HHIP”) as we have taken actions to reduce our exposure to wind and hail while achieving planned premium rate increases.
Previous wording
For the three months ended March 31, 2024, adjusted EBITDA loss was $19.8 million, a decrease of $32.3 million compared to a $52.1 million EBITDA loss for the three months ended March 31, 2023. The decrease was due primarily to a growth in revenue reflecting an increase in premiums earned mainly due to higher premium retention as a result of the 2023 and 2024 reinsurance treaty compared to prior periods, a lower HHIP gross loss ratio, and a decrease in other operating expenses. These improvements in EBITDA were partially offset by an increase in losses due to higher premium retention as noted above and overall growth of our book of business. For the three months ended March 31, 2024, our net loss ratio was 87% compared to 273% for the three months ended March 31, 2023.
Current wording
For the three months ended June 30, 2024, adjusted EBITDA loss was $24.9 million, a decrease of $62.8 million compared to a $87.7 million EBITDA loss for the three months ended June 30, 2023. The decrease was due primarily to a growth in revenue reflecting an increase in premiums earned mainly due to higher premium retention as a result of the 2023 and 2024 reinsurance treaty compared to prior periods, a lower HHIP gross loss ratio due primarily to the benefits of the pricing and underwriting actions we have taken, including a reduction of loss participation features in our reinsurance treaties, and a decrease in other operating expenses.
Previous wording
For the three months ended March 31, 2024, our Gross Loss Ratio was 59% compared with 76% for the three months ended March 31, 2023. The decrease reflected the benefits of the pricing and underwriting actions we have taken. We expect continued improvement as these actions have more time to impact our financial results. There was no material PCS or non-PCS prior year developments in the current quarter. The prior year quarter includes 1 percentage point of net favorable development relating to PCS events.
Current wording
For the six months ended June 30, 2024, our Gross Loss Ratio was 58% net of a prior year favorable development of 2 percentage points relating to PCS events compared with 93% net of a prior year favorable development of 3 percentage points relating to Non-PCS events and 2 percentage points relating to PCS events for the six months ended June 30, 2023. The decrease reflected the benefits of the pricing and underwriting actions we have taken and due to a lower impact from PCS events. We expect continued improvement as these actions have more time to impact our financial results.
Previous wording
For the three months ended March 31, 2024, our Services segment, which earns fees and/or commission income without assuming underwriting risk or need for reinsurance, had Total Generated Premium of $133.7 million, an increase of 37% from $97.9 million over the prior year quarter, while revenue was $11.4 million, an increase of 16% from $9.8 million over the prior year quarter. The growth was driven primarily due to the growth in the total book of business in our aggregator channel, as well as in our builder channel for new and renewal business, as we maintain higher retention rates and experienced premium rate increases. Our adjusted operating loss was $5.3 million, a decrease of 51% compared to a loss of $10.8 million in the prior year quarter, due primarily to the increase in revenue noted above and a decrease in advertising costs.
Current wording
For the three months ended June 30, 2024, our Services segment, which earns fees and/or commission income without assuming underwriting risk or need for reinsurance, had Total Generated Premium of $163.3 million, an increase of 38% from $118.1 million over the prior year quarter, while revenue was $12.1 million, an increase of 5% from $11.5 million over the prior year quarter. The growth was driven primarily due to the growth in the total book of business in our aggregator channel, as well as in our builder channel for new and renewal business, as we maintain higher retention rates and experienced premium rate increases. Our adjusted operating loss was $4.5 million, a decrease of 53% compared to a loss of $9.6 million in the prior year quarter, due primarily to lower adjusted operating expenses including a decrease in advertising costs, and an increase in revenue as noted above.
Previous wording
Our Insurance-as-a-Service segment, which through our carrier, Spinnaker, leverages our capital and insurance licenses to provide capacity to third party MGAs, creating diversified income through fees, underwriting profits, and investment income. For the three months ended March 31, 2024, Total Generated Premium was $130.0 million, an increase of 25% from $104.0 million over the prior year quarter, while revenue was $20.4 million, an increase of 58% from $12.9 million over the prior year quarter. The growth was driven primarily by the increase in performance of existing programs. Adjusted operating income was $4.7 million, an increase of 47% compared to income of $3.2 million in the prior year quarter, due primarily to the increase in revenue mentioned above, partially offset by an increase in insurance related expenses and loss and loss adjustment expenses due to the growth of the book of business.
Current wording
Our Insurance-as-a-Service segment, which through our carrier, Spinnaker, leverages our capital and insurance licenses to provide capacity to third party MGAs, creating diversified income through fees, underwriting profits, and investment income. For the three months ended June 30, 2024, Total Generated Premium was $186.3 million, an increase of 23% from $151.7 million over the prior year quarter, while revenue was $24.4 million, an increase of 51% from $16.2 million over the prior year quarter. The growth was driven primarily by the increase in performance of existing programs. Adjusted operating income was $5.7 million, an increase of 21% compared to income of $4.7 million in the prior year quarter, due primarily to the increase in revenue mentioned above, partially offset by an increase in insurance related expenses and loss and loss adjustment expenses due to the growth of the book of business.
Previous wording
For the three months ended March 31, 2024, our Hippo Homeowners Insurance Program had Total Generated Premium of $65.5 million, a decrease of 29% from $92.2 million over the prior year quarter, while revenue was $55.1 million, an increase of 185% from $19.3 million over the prior year quarter. The increase in revenue was due primarily to higher net earned premium, partially offset by a decrease in commission income, net, reflecting changes in our 2023 and 2024 reinsurance treaties, resulting in higher premium retention, and achieving planned premium rate increases. The increase in revenue from net earned premiums was partially offset by the cost of XOL premiums for our catastrophic coverage which results in an increase in ceded earned premium and lower net earned premium. We purchased XOL to cover events in excess of per occurrence limits based on the expected growth in exposure during the year. For the three months ended March 31, 2024 and 2023, $7.1 million and $7.4 million, respectively, was offset against earned premium for XOL. Adjusted operating loss was $20.2 million in the quarter, a decrease of 54% compared to a loss of $44.3 million in the prior year quarter. The decrease in adjusted operating loss was due primarily to the increase in revenue noted above, a decrease in PCS catastrophic weather and other weather loss experience and our loss participation features, which was partially offset by an increase in losses due to the higher premium retention as noted above.
Current wording
For the six months ended June 30, 2024, our Hippo Homeowners Insurance Program had Total Generated Premium of $139.6 million, a decrease of 28% from $194.4 million over the prior year period, while revenue was $111.3 million, an increase of 164% from $42.1 million over the prior year quarter. The increase in revenue was due primarily to higher net earned premium, partially offset by a decrease in commission income, net, reflecting changes in our 2023 and 2024 reinsurance treaties, resulting in higher premium retention, and achieving planned premium rate increases. We purchased XOL to cover events in excess of per occurrence limits based on the expected growth in exposure during the year which results in an increase in ceded earned premium and lower net earned premium. For the six months ended June 30, 2024 and 2023, $15.0 million and $15.9 million, respectively, was offset against earned premium for XOL. Adjusted operating loss was $46.2 million in the quarter, a decrease of 63% compared to a loss of $126.2 million in the prior year quarter. The decrease in adjusted operating loss was due primarily to the increase in revenue noted above, a decrease in sales and marketing expenses, including a reduction in headcount and decrease in sales commissions, as well as an improvement in our net loss ratio due to improved terms on our reinsurance treaties and a lower impact of PCS events. This was partially offset by an increase in insurance related expenses due to higher premium retention.
Previous wording
The following table sets forth our consolidated results of operations data for the periods presented (in millions, except percent data):
Current wording
The following table sets forth our condensed consolidated results of operations data for the periods presented (in millions, except percent data):
Previous wording
Comparison of the Three Months Ended March 31, 2024 and 2023
Current wording
Comparison of the Three and Six Months Ended June 30, 2024 and 2023
Previous wording
For the three months ended March 31, 2024, net earned premium was $60.5 million, an increase of $46.7 million compared to $13.8 million for the three months ended March 31, 2023. This increase was due primarily to increases in gross earned premium due to year-over-year growth of our total book of business and higher retention of earned premium due to our 2023 and 2024 reinsurance treaties, partially offset by an increased cost of XOL premiums for our catastrophic coverage which results in an increase in ceded earned premium and lower net earned premium. We purchased XOL to cover events in excess of per occurrence limits based on the expected growth in exposure during the year. For the three months ended March 31, 2024 and 2023, $13.5 million and $11.7 million, respectively, was offset against earned premium for XOL.
Current wording
For the three months ended June 30, 2024, net earned premium was $64.4 million, an increase of $42.1 million compared to $22.3 million for the three months ended June 30, 2023. This increase was due primarily to increases in gross earned premium due to year-over-year growth of our total book of business and higher retention of earned premium due to our 2023 and 2024 reinsurance treaties, partially offset by an increased cost of XOL premiums for our catastrophic coverage which results in an increase in ceded earned premium and lower net earned premium. We purchased XOL to cover events in excess of per occurrence limits based on the expected growth in exposure during the year. For the three months ended June 30, 2024 and 2023, $15.4 million and $13.9 million, respectively, was offset against earned premium for XOL.
Previous wording
The following table presents gross written premium, ceded written premium, net written premium, change in unearned premium, and net earned premium for the three months ended March 31, 2024 and 2023 (in millions).
Current wording
The following table presents gross written premium, ceded written premium, net written premium, change in unearned premium, and net earned premium for the three and six months ended June 30, 2024 and 2023 (in millions).
Previous wording
For the three months ended March 31, 2024, commission income was $15.9 million, a decrease of $1.5 million, or 9%, compared to $17.4 million for the three months ended March 31, 2023. The decrease was due primarily to a decrease in ceding commissions of $6.6 million due to higher premium retention, which decreases ceding commissions and increases net earned premium. This decrease was partially offset by an increase in agency commissions of $3.5 million and carrier fronting fees of $1.7 million, both of which grew due to the year-over-year growth of our total book of business.
Current wording
For the three months ended June 30, 2024, commission income was $16.1 million, a decrease of $0.1 million, or 1%, compared to $16.2 million for the three months ended June 30, 2023. The decrease was due primarily to a decrease in ceding commissions of $4.0 million due to higher premium retention, which decreases ceding commissions and increases net earned premium. This decrease was partially offset by an increase in agency commissions of $2.5 million and carrier fronting fees of $1.0 million, both of which grew due to the year-over-year growth of our total book of business.
Previous wording
For the three months ended March 31, 2024, service and fee income was $2.8 million, a decrease of $0.4 million, or 13%, compared to $3.2 million for the three months ended March 31, 2023. The decrease was due primarily to a decrease in non-inspection policy fees and fee sharing arrangements.
Current wording
For the three months ended June 30, 2024, service and fee income was $3.0 million, a decrease of $0.8 million, or 21%, compared to $3.8 million for the three months ended June 30, 2023. The decrease was due primarily to a decrease in policy fees and fee sharing arrangements.
Previous wording
For the three months ended March 31, 2024, net investment income was $5.9 million, an increase of $0.5 million, compared to $5.4 million for the three months ended March 31, 2023. The increase was due primarily to an increase in yields and diversification. We are mainly invested in money market accounts, securities issued by the U.S. government and agencies, high-grade corporate securities, residential and commercial mortgage-backed securities, and other governmental related securities.
Current wording
For the three months ended June 30, 2024, net investment income was $6.1 million, an increase of $0.7 million, compared to $5.4 million for the three months ended June 30, 2023. The increase was due primarily to an increase in yields and diversification. We are mainly invested in money market accounts, securities issued by the U.S. government and agencies, high-grade corporate securities, residential and commercial mortgage-backed securities, and other governmental related securities.
Previous wording
For the three months ended March 31, 2024, loss and loss adjustment expenses were $52.6 million, an increase of $14.9 million, compared to $37.7 million for the three months ended March 31, 2023. The increase was due primarily to an increase in losses due to higher premium retention rates and the growth of our book of business.
Current wording
For the three months ended June 30, 2024, loss and loss adjustment expenses were $60.4 million, a decrease of $16.3 million, compared to $76.7 million for the three months ended June 30, 2023. The decrease was due primarily to an improvement in our net loss ratio due to improved terms on our reinsurance treaties and a lower impact of PCS events, which is partially offset by an increase in losses due to higher premium retention rates and the growth of our book of business.
Previous wording
For the three months ended March 31, 2024, insurance related expenses were $20.8 million, an increase of $5.0 million, or 32%, compared to $15.8 million for the three months ended March 31, 2023. The increase was due primarily to an increase in amortization of deferred direct acquisition costs of $5.5 million due to higher premium retention rates and the growth of our book of business.
Current wording
For the three months ended June 30, 2024, insurance related expenses were $24.5 million, an increase of $5.7 million, or 30%, compared to $18.8 million for the three months ended June 30, 2023. The increase was due primarily to an increase in amortization of deferred direct acquisition costs of $5.7 million due to higher premium retention rates and the growth of our book of business. This was partially offset by a decrease in underwriting costs.
Previous wording
Direct acquisition costs were $24.2 million for the three months ended March 31, 2024, of which $12.7 million were offset by ceding commission income.
Current wording
Direct acquisition costs were $20.7 million and $44.9 million for the three and six months ended June 30, 2024, of which $8.1 million and $20.8 million were offset by ceding commission income.
Previous wording
Direct acquisition costs were $16.3 million for the three months ended March 31, 2023, of which $10.3 million were offset by ceding commission income.
Current wording
Direct acquisition costs were $19.7 million and $36.0 million for the three and six months ended June 30, 2023, of which $12.8 million and $23.1 million were offset by ceding commission income.
Previous wording
For the three months ended March 31, 2024, technology and development expenses were $8.3 million, a decrease of $3.3 million, or 28%, compared to $11.6 million for the three months ended March 31, 2023. The decrease was due primarily to a decrease in employee-related costs of $3.4 million, including a decrease in stock-based compensation of $1.7 million, driven by a decrease in headcount. The decrease was partially offset by a decrease in capitalized internal use software costs of $1.0 million.
Current wording
For the three months ended June 30, 2024, technology and development expenses were $7.8 million, a decrease of $5.3 million, or 40%, compared to $13.1 million for the three months ended June 30, 2023. The decrease was due primarily to a decrease in employee-related costs of $5.3 million, including a decrease in stock-based compensation of $2.0 million, driven by a decrease in headcount.
Previous wording
For the three months ended March 31, 2024, sales and marketing expenses were $14.4 million, a decrease of $8.0 million, or 36%, compared to $22.4 million for the three months ended March 31, 2023. The decrease was due primarily to a decrease in advertising costs of $3.0 million and a decrease in employee-related costs of $3.8 million, including a decrease stock-based compensation of $2.4 million due to a decrease in headcount.
Current wording
For the three months ended June 30, 2024, sales and marketing expenses were $13.4 million, a decrease of $9.2 million, or 41%, compared to $22.6 million for the three months ended June 30, 2023. The decrease was due primarily to a decrease in advertising costs of $2.4 million and a decrease in employee-related costs of $2.0 million, including a decrease in stock-based compensation of $0.9 million due to a decrease in headcount. The decrease was also due to the change in fair value of contingent consideration of $2.5 million and decrease in commission expense of $0.8 million.
Previous wording
For the three months ended March 31, 2024, general and administrative expenses were $18.3 million, a decrease of $1.5 million, or 8%, compared to $19.8 million for the three months ended March 31, 2023. The decrease was due primarily to a decrease in stock-based compensation of $2.5 million which was partially offset by an increase in legal costs of $1.1 million.
Current wording
For the three months ended June 30, 2024, general and administrative expenses were $19.9 million, a decrease of $1.6 million, or 7%, compared to $21.5 million for the three months ended June 30, 2023. The decrease was due primarily to a decrease in stock-based compensation of $2.3 million and a decrease in corporate insurance costs of $0.8 million. This was partially offset by an increase in legal costs of $1.8 million.
Previous wording
For the three months ended March 31, 2024, impairment and restructuring charges were $3.6 million which is primarily related to the impairment of a lease right-of-use asset due to abandonment of leased office space.
Current wording
For the six months ended June 30, 2024, impairment and restructuring charges were $3.6 million which primarily related to the impairment of a lease right-of-use asset due to abandonment of leased office space. There were no impairment and restructuring charges for the six months ended June 30, 2023.
Previous wording
For the three months ended March 31, 2024, other income, net was $0.0 million compared to an expense of $0.3 million for the three months ended March 31, 2023. The decrease in other income, net was due primarily to changes in the fair market value on the outstanding public and private placement warrants and our share of losses from equity method investees.
Current wording
For the six months ended June 30, 2024, other expense, net was $0.0 million compared to $0.5 million for the six months ended June 30, 2023. The decrease in other expense, net was due primarily to a decrease in our share of losses from equity method investees.
Previous wording
For the three months ended March 31, 2024, income tax expense was $0.2 million, an increase of $0.1 million compared to an expense of $0.3 million for the three months ended March 31, 2023.
Current wording
For the three months ended June 30, 2024, income tax expense was $0.7 million, an increase of $0.5 million compared to $0.2 million for the three months ended June 30, 2023.
Previous wording
For the three months ended March 31, 2024, net loss attributable to Hippo was $35.7 million, a decrease of $34.1 million compared to $69.8 million for the three months ended March 31, 2023 due to the factors described above.
Current wording
For the three months ended June 30, 2024, net loss attributable to Hippo was $40.5 million, a decrease of $67.3 million compared to $107.8 million for the three months ended June 30, 2023 due to the factors described above.
Previous wording
Our existing sources of liquidity include cash and cash equivalents and marketable securities. As of March 31, 2024, we had $223.4 million of cash, $39.9 million of restricted cash, and $287.4 million of available-for-sale fixed income securities and short-term investments.
Current wording
Our existing sources of liquidity include cash and cash equivalents and marketable securities. As of June 30, 2024, we had $220.2 million of cash, $44.3 million of restricted cash, and $315.5 million of available-for-sale fixed income securities and short-term investments.
Previous wording
In addition, we are a member of the Federal Home Loan Bank (FHLB) of New York, which provides secured borrowing capacity. Our borrowing capacity as of March 31, 2024, is $11.9 million, and there were no outstanding amounts under this agreement.
Current wording
In addition, we are a member of the Federal Home Loan Bank (FHLB) of New York, which provides secured borrowing capacity. Our borrowing capacity as of June 30, 2024, is $11.3 million, and there were no outstanding amounts under this agreement.
Previous wording
Cash used in operating activities represents payments for our operations including, payroll, loss and loss adjusted expenses and marketing activities. Cash provided by operating activities was $17.7 million for the three months ended March 31, 2024, a decrease of $53.4 million, from cash used in operating activities of $35.7 million for the three months ended March 31, 2023. Our cash used in operations was lower than last year due primarily to an increase in revenues as well as working capital changes that benefited cash, including a decrease in prepaid reinsurance premiums due to higher premium retention. This was partially offset by an increase in our loss and loss adjustment expenses.
Current wording
Cash used in operating activities represents payments for our operations including, payroll, loss and loss adjusted expenses and marketing activities. Cash provided by operating activities was $7.1 million for the six months ended June 30, 2024, an increase of $52.1 million, from cash used in operating activities of $45.0 million for the six months ended June 30, 2023. The increase was due primarily to an increase in revenues as well as working capital changes that benefited cash due to higher premium retention and improved terms on our reinsurance treaties.
Previous wording
Cash provided by investing activities was $58.5 million for the three months ended March 31, 2024, due primarily to the maturities of investment securities, partially offset by purchases of investment securities.
Current wording
Cash provided by investing activities was $30.4 million for the six months ended June 30, 2024, due primarily to the maturities of investment securities, partially offset by purchases of investment securities.
Previous wording
Cash provided by investing activities was $13.8 million for the three months ended March 31, 2023, due primarily to purchases of investment securities partially offset by maturities and sales of investment securities.
Current wording
Cash provided by investing activities was $48.8 million for the six months ended June 30, 2023, due primarily to the maturities and sales of investment securities, partially offset by purchases of investment securities and an office building.
Previous wording
Cash used in financing activities was $1.9 million for the three months ended March 31, 2023, primarily driven by taxes paid related to net share settlement of RSUs and distributions to noncontrolling interests.
Current wording
Cash used in financing activities was $12.4 million for the six months ended June 30, 2024, primarily driven by distributions to noncontrolling interests and change in fiduciary liabilities, and taxes paid related to net share settlement of RSUs, partially offset by proceeds from common stock issuances.
Previous wording
Cash used in financing activities was $8.0 million for the three months ended March 31, 2024, primarily driven by distributions to noncontrolling interests and taxes paid related to net share settlement of RSUs, partially offset by proceeds from common stock issuances.
Current wording
Cash used in financing activities was $9.9 million for the six months ended June 30, 2023, primarily driven by distributions to noncontrolling interests, repurchases of shares, and taxes paid related to net share settlement of RSUs, partially offset by proceeds from common stock issuances.
Previous wording
Our material cash requirements from known contractual and other obligations primarily relate to purchase commitments, lease payments, and unpaid loss and loss adjustment expense. There have been no material changes to our contractual obligations from those described in the Annual Report on Form 10-K for the year ended December 31, 2023, other than an increase in Unpaid Loss and Loss Adjustment Expense. The estimation of the unpaid losses and loss adjustment expenses is based on various complex and subjective judgments. Actual losses paid may differ, perhaps significantly, from the reserve estimates reflected in our condensed consolidated financial statements. Similarly, the timing of payment of our estimated losses is not fixed and there may be significant changes in actual payment activity. The assumptions used in estimating the likely payments due by period are based on our historical claims payment experience and industry payment patterns, but due to the inherent uncertainty in the process of estimating the timing of such payments, there is a risk that the amounts paid can be significantly different from the amounts disclosed.
Current wording
Our material cash requirements from known contractual and other obligations primarily relate to purchase commitments, lease payments, and unpaid loss and loss adjustment expense. There have been no material changes to our contractual obligations from those described in the Annual Report on Form 10-K for the year ended December 31, 2023, other than an increase in Unpaid Loss and Loss Adjustment Expense. The estimation of the unpaid losses and loss adjustment expenses is based on various complex and subjective judgments. Actual losses paid may differ, perhaps significantly, from the reserve estimates reflected in our condensed consolidated financial statements.
Rearranged current paragraphs (9)
Current report — wording carried from elsewhere
XOL program described below. Amounts payable under the reinsurance agreement with respect to any covered event cannot exceed our actual losses from such event.
Current report — wording carried from elsewhere
Our Total Generated Premium for the six months ended June 30, 2024 grew 20% year-over-year to $673.6 million from $562.6 million for the six months ended June 30, 2023. The growth was driven primarily by the growth of non-Hippo written premium supported by our Insurance-as-a-Service business, the growth in the total book of business in our aggregator channel, as well as in our builder channel for new and renewal business, as we maintain higher retention rates and experienced premium rate increases. This was partially offset by a decrease in our Hippo Home Insurance Program (“HHIP”) as we have taken actions to reduce our exposure to wind and hail while achieving planned premium rate increases.
Current report — wording carried from elsewhere
For the six months ended June 30, 2024, adjusted EBITDA loss was $44.7 million, a decrease of $95.2 million compared to a $139.9 million EBITDA loss for the six months ended June 30, 2023. The decrease was due primarily to a growth in revenue reflecting an increase in premiums earned mainly due to higher premium retention as a result of the 2023 and 2024 reinsurance treaty compared to prior periods, a lower HHIP gross loss ratio due primarily to the benefits of the pricing and underwriting actions we have taken, including a reduction of loss participation features in our reinsurance treaties, and a decrease in other operating expenses.
Current report — wording carried from elsewhere
For the six months ended June 30, 2024, Total Generated Premium was $316.3 million, an increase of 24% from $255.7 million over the prior year period, while revenue was $44.8 million, an increase of 53% from $29.2 million over the prior year period. The growth was driven primarily by the increase in performance of existing programs. Adjusted operating income was $10.4 million, an increase of 32% compared to income of $7.9 million in the prior year quarter, due primarily to the increase in revenue mentioned above, partially offset by an increase in insurance related expenses and loss and loss adjustment expenses due to the growth of the book of business.
Current report — wording carried from elsewhere
For the three months ended June 30, 2024, our Hippo Homeowners Insurance Program had Total Generated Premium of $74.1 million, a decrease of 27% from $102.2 million over the prior year quarter, while revenue was $56.2 million, an increase of 149% from $22.6 million over the prior year quarter. The increase in revenue was due primarily to higher net earned premium, partially offset by a decrease in commission income, net, reflecting changes in our 2023 and 2024 reinsurance treaties, resulting in higher premium retention, and achieving planned premium rate increases. We purchased XOL to cover events in excess of per occurrence limits based on the expected growth in exposure during the year which results in an increase in ceded earned premium and lower net earned premium.
Current report — wording carried from elsewhere
For the six months ended June 30, 2024, net earned premium was $124.9 million, an increase of $88.8 million compared to $36.1 million for the six months ended June 30, 2023. This increase was due primarily to increases in gross earned premium due to year-over-year growth of our total book of business and higher retention of earned premium due to our 2023 and 2024 reinsurance treaties, partially offset by an increased cost of XOL premiums for our catastrophic coverage which results in an increase in ceded earned premium and lower net earned premium. We purchased XOL to cover events in excess of per occurrence limits based on the expected growth in exposure during the year. For the six months ended June 30, 2024 and 2023, $28.9 million and $25.6 million, respectively, was offset against earned premium for XOL.
Current report — wording carried from elsewhere
For the six months ended June 30, 2024, commission income was $32.0 million, a decrease of $1.6 million, or 5%, compared to $33.6 million for the six months ended June 30, 2023. The decrease was due primarily to a decrease in ceding commissions of $10.6 million due to higher premium retention, which decreases ceding commissions and increases net earned premium. This decrease was partially offset by an increase in agency commissions of $6.1 million and carrier fronting fees of $2.7 million, both of which grew due to the year-over-year growth of our total book of business.
Current report — wording carried from elsewhere
For the six months ended June 30, 2024, net investment income was $12.0 million, an increase of $1.2 million, compared to $10.8 million for the six months ended June 30, 2023. The increase was due primarily to an increase in yields and diversification. We are mainly invested in money market accounts, securities issued by the U.S. government and agencies, high-grade corporate securities, residential and commercial mortgage-backed securities, and other governmental related securities.
Current report — wording carried from elsewhere
Similarly, the timing of payment of our estimated losses is not fixed and there may be significant changes in actual payment activity. The assumptions used in estimating the likely payments due by period are based on our historical claims payment experience and industry payment patterns, but due to the inherent uncertainty in the process of estimating the timing of such payments, there is a risk that the amounts paid can be significantly different from the amounts disclosed.