Hippo CEO “proud” of decision to stop offering home insurance

“We are very happy that we have taken this disciplined approach.”

Hippo Insurance’s decision to temporarily stop writing new home insurance policies across the United States almost a year ago was met with “mixed reactions” in the industry, according to its CEO.

But in retrospect, Rick McCathron (pictured) said he did not regret pressing the pause button.

“In retrospect, we are very happy that we took this disciplined approach,” said McCathron Insurance business“Because when you compare what happened in the second quarter (2024) with other companies, we showed that the disciplined approach made a significant difference in our results.”

“I am proud that we had the strength to make this difficult decision and I am also pleased that it was ultimately just a small slip-up that enabled us to continue to grow the business profitably.”

The appropriateness of tariffs is still “an ongoing process” for Hippo Insurance

The nationwide suspension of new business with the Hippo Home Insurance Program (HHIP) helped the insurtech company weigh the catastrophe risk, underwriting terms and rates of the offering.

Losses from weather events, primarily wind and hail, drove HHIP’s gross loss ratio to 178% in the second quarter of 2023. In its second quarter of 2024 earnings report, Hippo reported a significant year-on-year improvement of 94 percentage points (pp) on the same metric, at 84%.

In addition, Hippo recorded a 96 percentage point improvement in its gross loss ratio in the PCS (property and casualty) area, due to higher deductibles and lower exposure to severe weather.

Net loss attributable to Hippo decreased 62% year-over-year to $41 million for the quarter, while adjusted EBITDA loss decreased 72% year-over-year to $25 million.

McCathron said Hippo’s price adjustments and strategic actions are beginning to bear fruit, but tariff adequacy remains “an ongoing process.”

“The rate changes and enrollments we’ve made will take a full year to take full effect … because they only apply at policy renewal. We started this process in October of last year and it won’t be complete until October of this year,” he said. “With our recent second quarter results, which go through June, we still have several months where the impact of these changes will continue to show up in our financials.”

“Rate adequacy is an ongoing process. We are constantly monitoring trends in frequency, severity, global weather patterns and our portfolio. While future adjustments may not be as significant as the ones we made recently, it is an ongoing effort. Our technology gives us the unique advantage to iterate quickly and stay one step ahead. So yes, we will continue to make adjustments as needed.”

“We passed the test” – is Hippo still on track to achieve its profitability targets?

For the second quarter of 2024, Hippo reported an 88% year-over-year increase in revenue to $90 million, reflecting a favorable shift in the company’s product mix.

This growth was driven by strong performance in the Services and Insurance-as-a-Service (IaaS) segments, which together accounted for 83% of the company’s total generated premiums (TGP). Consolidated TGP grew 20% year-on-year, with Services and IaaS growing 38% and 23% year-on-year, respectively.

McMathron said, “Although the industry faced challenges due to severe weather, we were unaffected, which speaks to the hard work and discipline our team has shown since the second quarter of 2023.”

The CEO expressed confidence that Hippo will achieve its main goal for 2024: adjusted EBITDA profitability.

“This work was a powerful test, and we passed with flying colors,” McCathron said. “We are growing faster than we expected, so we have increased our total premium income forecast for the remainder of the year.”

When asked when the current product will return to the market, McCathron replied: “When we are confident that every policy we issue has an expected loss ratio that ensures a profit.”

“We have seen significant growth through our new build channel and agency and want to be cautious with pricing to ensure sustainability,” he added.

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