Q4 2021 Hippo Holdings Inc Earnings Call

Good afternoon.

Good afternoon. Thank you for attending today's HIPAA 4th Quarter 2021 Earnings Call. My name is Hannah and I will be your moderator for today's call. All lines will be needed during the presentation portion of the call.

Noon. Thank you for attending today's supposed fourth quarter 2021 earnings call. My name is Anna and I will be your moderator for today's call all lines will be needed during the presentation portion of this with an opportunity for questions.

I'll ask a question. Please press star one on your telephone keypad.

Speaker Change: telephone keypad. I would now like to pass the conference over to our host.

I would now like to pass the conference over to our host.

Yeah.

Please go ahead.

Good afternoon, everybody and thank you for joining both fourth quarter 2021 earnings conference call.

Host: Good afternoon, everybody, and thank you for joining HIPPO's fourth quarter 2021 burning talk.

Host: Earlier today, HIPPO issued a shareholder letter announcing its fourth quarter results, which is also available at investors.hippo.com.

Earlier today <unk> issued a shareholder letter announcing our fourth quarter results, which is also available at investors Hippo Dot com.

Host: Leading today's discussion will be HIPPO's Chief Executive Officer, Safwan, President, Rick McCafferran, and Chief Financial Officer, Stuart Ellis. Following management's prepared remarks, we will open up the call to questions.

Leading today's discussion will be hit those chief Executive Officer, Sakmann, President, Rick Catherine and Chief Financial Officer Stuart.

Boeing managements prepared remarks, we will open up the call to questions.

Before we begin I'd like to remind you that our discussion will contain predictions expectations forward looking statements and other information about our business that are based on management's current expectations as of the date of this presentation forward. Looking statements include but are not limited to <unk> expectations or predictions of the financial and business performance condition.

Host: Before we begin, I'd like to remind you that our discussion will contain predictions, expectations, forward-looking statements, and other information about our business that is based on NASA's current expectations.

Host: as of the date of this presentation. Forward-looking statements include, but are not limited to, HIPAA's expectations or predictions of financial and business performance and conditions in competitive and industry outlook. Forward-looking statements are subject to risk, uncertainties, and other factors that will cause our actual results to differ materially from historical results and or from our forecast, including those set forth in HIPAA's Form 8K file today.

The industry outlook.

Payments are subject to risks uncertainties and other factors that will cause our actual results to differ materially from historical results <unk> from our forecast, including those set forth in that both form 8-K filed today.

Host: For more information, please refer to the risks, uncertainties, and other factors discussed in Tickle-as-a-Chickpea filing. All cautionary statements that we make during this call are absolutely any forward-looking statements we make whenever they appear.

More information please refer to the risks uncertainties and other factors discussed the deposits filings all cautionary statements that we make during this call and any forward looking statements. We make whenever they appear you should carefully consider the risks and uncertainties other factors.

Host: You should carefully consider the risks and uncertainties and other factors discussed in HIPAA's FAC filing. Do not place undue reliance on forward-looking statements as HIPAA is under no obligation and expressly disclaims any responsibility for updating, altering, or otherwise revising any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. During the conference call, we will also refer to non-GAAP financial measures.

The SEC filings do not place undue reliance on forward looking statements as if it was under no obligation and expressly disclaims any responsibility for updating offering or otherwise revise any forward looking statements, whether as a result of new information future events or otherwise except as required by law. During the call. We will also refer to non-GAAP financial measures.

Speaker Change: such as Total Generated Premium and Adjusted EBITDA. Our GAAP results and descriptions of our non-GAAP financial measures with a full reconciliation to GAAP can be found in the fourth quarter 2021 shareholder letter, which has been furnished to the FEC and available on our website. And with that, I'll turn the call over to Gustav Klein, co-founder and CEO of EBITDA. Thank you, Philippe.

As total generated premium adjusted EBITDA, our GAAP result, and descriptions of our non-GAAP financial measures with a full reconciliation to GAAP can be found in our fourth quarter 2021 shareholder letter, which has been furnished to the SEC and available on our website and with that I'll turn the call over to <unk> co founder and CEO .

Thank you Leigh good afternoon everybody.

2021, where they give up Mike.

Gustav Klein: 2021 was a year of milestones for HIPAA, including the public listing for HIPAA shares and annual total generated premiums crossing $600 million.

Including the public lifting Mohit will share at an annual total generated premium crossed the $600 million.

Some of the successes were tempered by headwinds such as telephone in the equity markets or many tech growth oriented company.

Gustav Klein: Some of these successes were tempered by headwinds, such as a sell-off in the equity markets for many tech growth-oriented companies, catastrophe losses in our major geographic markets, and heightened lost cost pressure for home repair.

Accurately losses in our major geographic markets and heightened loss cost pressure all we do.

However people ended the year operationally and financially strong and are positioned to patiently wait out the volatility of financial markets and are laser focused on executing against our long term vision of protecting the joy of homeownership.

Gustav Klein: However, people ended their evaporation and financially strong in a position to patiently weather the volatility of financial markets and a laser focus on executing against our long-term vision of protecting the joy of homeowners.

We believe we are transforming the home insurance industry with a proactive and domestic unfortunately home production.

Gustav Klein: We believe we are transforming the home insurance industry with our proactive and holistic approach to home protection. Our 2021 growth in total generated premium of 80%, supported by an 88% EPO homeowners premium retention rate has validated that belief, so we are broadening our reach in 2022.

2021 growth in total generated premium of 80% supported by an 88% equal all wonder if premium retention rate as validated that the leap. So we are broadening our reach in 2022 and.

Gustav Klein: In the coming months, we plan to extend our geographic presence from 37 states by adding major states in the northeast, as well as extend within our existing footprint with new borders.

In the coming months, we plan to extend our geographic presence from 37 states by adding major space in the northeast.

Well as expand within our existing footprint with new products.

Gustav Klein: We will also continue to grow through our key partnerships.

We will also continue to grow our key partnerships.

Gustav Klein: Through major U.S. home builders such as Lennar and Tolbrado, we are sourcing some of our best customers, newly built, tech-enabled homes with owners who want to use technology to improve their home ownership experience.

Two major U S homebuilder, such as <unk> and <unk>, we are sourcing some of our best customers newly built tech enabled home with bono to want to use technology to improve their homeownership experience.

Gustav Klein: Through our partnership with major financial service companies, we're able to reach potential homeowners at the critical moment when home protection is at the forefront on their mind.

So our partnership with major financial service company, we're able to reach potential homeowner. It's a critical moment when home protection is at the forefront on their mind.

Gustav Klein: I am pleased by the strong progress we are making to improve our law.

I am pleased by the strong COVID-19 , we're making to improve our loss ratio.

Gustav Klein: A Q4 gross loss ratio of 89% was the best quarter of the year, in part benefiting from seasonality and also 13 points of reserve releases from prior periods.

Q4 gross loss ratio of 89% was the best quarter of deals in part benefiting from seasonality and also 13 points of reserve releases from prior periods.

Gustav Klein: We are improving our loss ratio as we mature by using our technology to better calibrate price and risk, increasing our geographic diversity, and entering new markets.

Improving our loss ratio as we mature by using our technology to better calibrate prices increasing.

Increasing our geographic diversity and entering new markets.

Gustav Klein: We view our focus in this area as particularly encouraging given the many pressures on lost costs.

We view our progress in this area is particularly encouraging given the many pressure on loss costs.

Gustav Klein: We also had successful reinsurance renewal in January . Despite the ardent reinsurance market, in which prices, terms, and conditions were under pressure, people was able to renew its main treaty with a panel of 11 A minus or higher rated reinsurers. This is up from a panel of nine in 2021. Our reinsurance partners are able to closely examine our underwriting practices, and we are grateful to have their continued support and confidence in our future results.

We also had successful reinsurance renewals in January despite the arent in the reinsurance market in which prices terms and conditions were under pressure.

Depot was able to renew a main treatment with a panel of 11 80 minus Ohio rated reinsurers. This.

His upcoming panel of nine in 2021.

Our reinsurance partner, our EBIT to closely examine our underwriting practices and we are grateful to have the continued support and confidence in our future results.

Gustav Klein: Technology remains a key differentiator for Ipoh. First, we leverage technology to help customers rest easy in their homes through preventative maintenance and home care. Through our own inspection process, either in person or through live video, we can inspect a customer's home, often leading us to facilitating preventative home repair measures.

<unk> remains a key differentiator for equal first we leverage technology to help customer breadth easing their home through preventative maintenance and homecare.

Well all inspection quarter either in person both through live video, we can expect the customers will often leading us to facilitate these preventative assembly pedal measures.

Gustav Klein: We also offer discounts to customers who partner with us to use technology like leak sensors or home security to help prevent loss.

We also offer discounts to customers and partner with us to use technology like leak sensor or home security to help prevent losses.

What customers might not be that way.

Gustav Klein: What customers might not see is that we're also leveraging our technology to build a modern insurance company. Actuaries, underwriters, claim adjusters, insurance and customer support agents all leverage our modern tech stack to turbocharge their productivity and scale their daily operations with consistency and reliability.

Also leveraging our technology to build a modern insurance company.

Actually underwriting claim adjusters insurance and customer support agents or leverage our modern tech stack to turbocharge, the productivity and scale, the Lady operation with consistency and reliability.

Speaker Change: Recognizing the all-encompassing role of technology at IPO, we are elevating one of our long-serving IPOs, Mr. Ran Arpaz, to the newly created position of COO.

Recognizing that all encompassing all of technology is equal we are elevating one of our long serving equal Mr. Ron I'll pause to the newly created position.

So Ron would maintain.

Speaker Change: Alan will maintain his current responsibilities as Chief Technology Officer and will also oversee our end-to-end customer experience from product inception all the way through customer support.

Maintaining his current responsibility as Chief Technology Officer, and will also oversee our end to end customer experience from product inception, all the way through customer support.

Speaker Change: Another major accomplishment for the year was that despite a very difficult hiring environment, we extended the ePub team to 621 people, attracting top talent across the range.

Another major accomplishment for the year was that despite a very difficult hiring environment.

And at the EBIT into 621 people.

Attracting top talent across the range of expertise.

Speaker Change: Starting our first day in 2022, we're particularly excited to welcome Ms. Grace Hanson, formerly with ISPA, to our Ipoh court to become our first Chief Claims Officer.

Starting the first day in 2022, we're particularly excited to welcome Greg Heckman, formerly with input.

So our April board to become a priest Chief claims officer.

Speaker Change: While we prefer to help our customers prevent claims, when unfortunate events do happen, we prioritize supporting our customers, and Grace will be working to enhance our capabilities in chain services.

While we prepare to help our customers prevent lane when unfortunate events do happen, we prioritized supporting our customers and grace will be working to enhance our capabilities in same service.

Speaker Change: While we are unsatisfied with the share price performance since our August 2021 listing, we have more confidence than ever in HIPAA's long-term prospects and ability to modernize home insurance and protect the joy of homeowners.

While it will and satisfied with the share price performance.

2021 listing we have more confidence than ever in EPS long term prospects and ability to modernize home insurance and protect the joy of homeownership now to talk a little bit more about our insurance operation I hand, the call over to our President Brakeman Gaslog.

Speaker Change: Now, to talk a little bit more about our insurance operation, I hand the call over to our President, Rick McCafferty.

Rick McCafferty: Thanks, Asaf. We believe 2021 was a preview of the long-term environment for the homeowners insurance industry.

Thanks, Thats all we believe 2021 with a preview of the long term environment for the homeowners insurance industry.

Rick McCafferty: Increased volatility, unpredictable climate activity, inflationary home repair costs, and supply disruptions will require providers to have a level of responsiveness not previously seen in the industry.

Increased volatility unpredictable climate activity in.

<unk> home repair cost and supply disruptions will require providers to have a level of responsiveness not previously seen in the industry.

Rick McCafferty: We have been developing a technology platform well-positioned for such challenges.

We have been developing a technology platform well positioned for such challenges.

Rick McCafferty: In December , we rolled out our latest iteration of our underwriting engine by introducing additional coverage options and using increased data, we have added granularity in our models.

In December we rolled out our latest iteration of our underwriting engine by introducing additional coverage options.

And using increased data.

We have added granularity in our models.

And our better matching price with risk.

Rick McCafferty: While some existing customers will see price increases, others will see reductions.

While some existing customers will see price increases others will see reductions.

Rick McCafferty: In Texas, for example, we have done significant re-underwriting in which approximately 25% of our Texas customers will see a rate decrease.

In Texas for example, we have done significant re underwriting in which approximately 25% of our Texas customers will see a rate decrease.

Rick McCafferty: We've also begun rolling out our multi-carrier strategy, utilizing Ally and Incline, giving us additional avenues to file and set rates for targeted markets, increasing the number of pricing segments, adding additional rating variables.

We've also begun rolling out our multi carrier strategy utilizing ally and end clients.

Additional avenues to file and set rates for targeted markets, increasing the number of pricing segments, adding additional rating variables.

Part of this strategy.

Rick McCafferty: is opening up Ally for HIPAA's preferred risks, enabling even more competitive pricing for preferred segments.

Is opening up ally for hippos preferred risks, enabling even more competitive pricing for preferred segments.

Our fastest growing distribution partnerships with homebuilders is also our most profitable channel.

Rick McCafferty: Our fastest-growing distribution partnerships with homebuilders is also our most profitable channel.

Rick McCafferty: These partnerships are having a positive impact on countrywide profitability.

These partnerships are having a positive impact on country wide profitability.

This channel now.

Rick McCafferty: and related portfolio continues to indicate that it is aligned with profitable growth.

Related portfolio continues to indicate.

That it is aligned with profitable growth.

Rick McCafferty: We have not filed any rate activity or rate actions in this area.

We have not filed any rate activity or rate actions in this area.

Rick McCafferty: One last point worth noting is how our tech stack allows us to accelerate pricing and underwriting changes.

One last point worth, noting is how our tech stack allows us to accelerate pricing and underwriting changes.

Our flexible tech stack enabled us to do more and do more quickly.

Rick McCafferty: Our flexible text fact enabled us to do more and do more quickly.

In our Texas rate filings, we introduced new data source, three new underwriting variables and new coverage restrictions.

Rick McCafferty: In our Texas rate filing, we introduced new data source, three new underwriting variables, and new coverage restrictions.

Rick McCafferty: under traditional carrier legacy systems. The specs for such changes are frequently required to be provided to the IT organization months in advance.

Under traditional carrier legacy systems, but specs for such changes our frequently required to be provided to the it organization months in advance.

Rick McCafferty: With our tech stack, we are able to program these immediately after the rate change has been submitted, meaning we can launch changes as soon as they receive regulatory approval.

With our tech stack, we were able to program. These immediately after the rate change has been submitted meaning we can launch changes as soon as they receive regulatory approval.

Rick McCafferty: The result in our timeline being shortened allows us to real-time finalize proposals and submissions to the state. The extra time enables us to use the most recent data to pick our loss and trend factors.

The result in our timeline being shortened allows us to real time, finalize proposals and submissions to the state the extra time that enabled us to use the most recent data.

To pick our loss and trend factors.

Rick McCafferty: As an example, we see inflation as a major area to watch in 2022, and we're able to include our view of our rate selection.

As an example, we see inflation is a major area to watch in 2022 and were able to include our view of our rate selections.

We are also constantly update and re underwrite each individual risk in our portfolio.

Rick McCafferty: We also constantly update and re-underwrite each individual risk in our portfolio. When a policy comes up for renewal, we don't simply mechanically add an inflation adjustment. We re-underwrite the policy, updating it for all new data we've accumulated since the last renewal to enable our customers to properly protect their homes.

When a policy comes up for renewal, we don't simply mechanically add an inflation adjustment, we re underwrite the policy updating it for all new data we've accumulated since the last renewal to enable our customers to properly protect their homes.

All in all we think our segmented multi pronged approach to pricing puts us in a great place to drive profitable growth in 2022, now I would like to pass it over to Stuart who will update you on our financial progress.

Rick McCafferty: All in all, we think our segmented, multi-pronged approach to pricing puts us in a great place to drive profitable growth in 2022. Now I'd like to pass it over to Stuart, who will update you on our financial progress. Thanks, Rick.

Rick and Hello, everyone.

Stuart Ellis: Total generated premium grew 53% year-over-year to reach $163 million in Q4 and grew 50% year-over-year to $606 million for the full year.

Total generated premium grew 53% year over year to reach $163 million in Q4 and grew 50% year over year $606 million for the full year.

Stuart Ellis: Our premium retention remained high at 88%, an indicator that our customers continue to be pleased with our service and product.

Our premium retention remained high at 88% an indicator that our customers continue to be pleased with our service and product.

Stuart Ellis: Our growth was spread across our many distribution channels. As we said before, we're happy for our customers to purchase HIPPO policies however they like, whether directly from HIPPO, through independent agents, or by way of one of our partnerships with home builders or financial institutions.

Our growth was spread across our many distribution channel as we've said before we're happy for our customers to purchase Hippo policies. However, they like whether directly from HIPAA through independent agents are by way of one of our partnerships with homebuilders or financial institutions.

Stuart Ellis: We grew in each of our 37 states, including Texas and California, where we have repositioned our regional mix within these large states to diversify our cat exposure. We expect to launch additional major states in 2020.

We grew in each of our 37 states, including Texas, and California, where we have repositioned our regional mix within these large state diversify our cat exposure.

We expect to launch additional major states in 2022.

Stuart Ellis: And for the full year 2022, we are targeting total generated premium in the range of $800 to $820 million.

For the full year 2022, we are targeting total generated premiums in the range of $800 million to $820 million.

Stuart Ellis: Revenue of $32 million in Q4 was up 96% year over year. Our revenue includes premiums earned on business we retain, growing streams of seating, MGA, and agency commissions paid to us by reinsurers or other carriers in exchange for sourcing customers and or risk that they retain on their balance sheets, as well as service and fee income from our customers.

Revenue of $32 million in Q4 was up 96% year over year. Our revenue includes premiums earned on business, we retain growing streams of seating MGA and agency commissions paid to us by reinsurers or other carrier and exchange for sourcing customers and there are risks that they retain on their balance sheet.

As well as service and fee income from our customers.

Stuart Ellis: Finally, through Spinnaker and its affiliates, our wholly owned, A-invest, A-rated group of insurance companies, we continue to expand our business with third-party program administrators, earning fronting fee income through our insurance-as-a-service model.

Finally through spinnaker and its affiliates are wholly owned and best a minus rated group of insurance companies. We continued to expand our business with third party program administrators, earning fronting fee income through our insurance as a service model.

Stuart Ellis: Over time, we expect an increased share of our earnings will be derived from a stable and recurring stream of fee and commission-based income. In 2022, we expect our revenue growth rate will exceed our QGP growth rate and that we will generate revenue in the range of $140 to $142 million.

Overtime, we expect an increased share of our earnings will be derived from our stable and recurring stream of fee and commission based income in 2022, we expect our revenue growth rate will exceed our GDP growth rate and that we will generate revenue in the range of $140 $142 million.

Stuart Ellis: Moving down the P&L, I'm pleased to report that we continue to make progress on improving our gross loss ratio.

Moving down the P&L I am pleased to report that we continue to make progress on improving our gross loss ratio.

Stuart Ellis: Q4's growth loss ratio of 89% is our best quarter of 2021.

Core gross loss ratio of 89% is our best quarter of 2021.

Stuart Ellis: Given historical patterns of seasonality and catastrophic weather events, we don't expect sequential improvement in each quarter of 2022, but we do expect meaningful year-over-year improvements.

The historical patterns of seasonality and catastrophic weather events, we don't expect sequential improvement in each quarter of 2022, but we do expect meaningful year over year improvement.

Stuart Ellis: We're making great strides on each of our initiatives to reach our intermediate goal of industry-level loss ratios while continuing to grow quickly.

We're making great strides on each of our initiatives to reach our intermediate goal of industry level loss ratios, while continuing to grow quickly.

Stuart Ellis: During the fourth quarter, TCF catastrophic losses accounted for 25 percentage points of our gross loss ratio. The largest of these events was the Marshall fire in Colorado on December 30th.

During the fourth quarter EPS catastrophic losses accounted for 25 percentage points of our gross loss ratio the largest of these events with the Marshal fire in Colorado in December 30th.

Stuart Ellis: Non-PCS large loss events accounted for an additional 11 percentage points.

Non pts large loss events accounted for an additional 11 percentage points.

Stuart Ellis: Our growth-loss ratio also benefited from releases of reserves held for prior periods in 2021 due to favorable development across all perils. These releases had a positive impact on our Q4 growth-loss ratio of 13 percentage points.

Our gross loss ratio also benefited from releases of reserves held for prior periods in 2021 due to favorable development across all apparel. These releases had a positive impact on our Q4 gross loss ratio of 13 percentage points.

And their book of business matures and achieved more balanced and geographic diversification, we expect volatility to catastrophic and large loss events to decline.

Stuart Ellis: As our book of business matures and achieves more balance and geographic diversification, we expect volatility and catastrophic and large loss events to decline.

Turning now to reinsurance.

Stuart Ellis: Despite a hardening reinsurance market, we successfully renewed and placed our primary homeowners reinsurance program for 2022. We expanded our quota share panel from 9 to 11 reinsurers, all of whom are either rated A-minus, excellent, or better by AMBES for our appropriately collateralized.

Despite a hardening reinsurance market, we successfully renewed and placed our primary homeowners reinsurance program for 2022.

We expanded our quota share panel from 9% to 11 reinsurers all of whom are either rated a minus excellent or better by and for our appropriately collateralized.

Stuart Ellis: As a reminder, we also have multi-year reinsurance for approximately one-third of our capacity from a separate reinsurance treaty we signed at the end of 2020. 2022 will be the second of its three-year term.

As a reminder, we also have multi year reinsurance for approximately one third of our capacity from a separate reinsurance treaty. We signed at the end of 2000 22022 will be the second of its three year term.

We expect to retain approximately 10% the homeowners premium that our MGA underwrites on the balance sheets of our insurance company subsidiaries or our captive reinsurance company.

Stuart Ellis: We expect to retain approximately 10% of the homeowner's premium that our MGA underwrites on the balance sheets of our insurance company subsidiaries or our captive reinsurance company.

Stuart Ellis: Our 2022 proportional reinsurance treaty does include lost participation features, which may increase the amount of risk retained by the company in excess of our pro rata participation of 10%.

Our 2022 proportional reinsurance Treaty does include loss participation features which may increase the amount of risk retained by the company in excess of our pro rata participation 10%.

Stuart Ellis: We reduce our risk retention through purchases of non-proportional reinsurance, like excess of loss coverage. This program provides protection from catastrophes that could impact a large number of our customers in a single event.

We reduced our risk retention through purchases of non proportional reinsurance like excess of loss coverage. This program provides protection from catastrophes that could impact a large number of our customers in a single a that we.

Stuart Ellis: we buy XOL coverage to a 1 in 250 year return period. Or said another way, the probability that losses from a single occurrence exceeds the purchase protection is 0.4% or less, protecting us from all but the most severe catastrophic events.

We buy <unk> coverage to a one in 250 year return period or said another way the probability that losses from a single apparent exceeds that purchased protection.

4% or less protecting us from all but the most severe catastrophic events.

Stuart Ellis: Sales and marketing expense increased to $25.7 million in Q4 versus $16.5 million in the prior year quarter. As we continue to see progress in our key KPIs, we have increased confidence in raising the profile of our brand with potential customers nationwide.

Sales and marketing expense increased $25 7 million in Q4 to $16 5 million in the prior year quarter as we continue to see progress in our key Kpis, we have increased confidence in raising the profile of our brand with potential customers nationwide.

Stuart Ellis: Technology and development expenses were $13.5 million in Q4 versus $4.8 million in the prior year quarter. Technology is the backbone of HIPPO, and we continue to relentlessly invest to improve our customer offering, our API-oriented ecosystem, and the efficiency of our platform.

Technology and development expenses were $13 5 million in Q4 versus $4 8 million in the prior year quarter technology is the backbone of hiccup and we continue to relentlessly invest to improve our customer offering our API oriented ecosystem and the efficiency of our platform.

Stuart Ellis: Nearly a quarter of our employees are on the technology team, with a talent depth that any Silicon Valley company would be proud to have.

Nearly a quarter of our employees around the technology team and the talent depth than any Silicon Valley company would be proud to have.

Stuart Ellis: General and administrative expenses were $18.6 million versus $9.5 million in the prior year quarter, reflecting the increased cost of operating as a public company and increases in stock-based compensation.

General and administrative expenses were $18 6 million versus $9 5 million in the prior year quarter, reflecting the increased cost of operating as a public company and increases in stock based compensation.

Stuart Ellis: Our cash, cash equivalents and investments at the end of the quarter stood at $839.6 million, positioning us well for an extended period of growth and investment.

Our cash cash equivalents and investments at the end of the quarter stood at $839 6 million positioning us well for an extended period of growth and investment.

Stuart Ellis: Net loss attributable to HIPPO was $60.7 million, or $0.11 per share, compared to a net loss of $54.1 million, or $0.60 per share in the prior year quarter. Adjusted EBITDA was a loss of $46 million versus a loss of $26.1 million in the year-ago quarter. We remain confident in our outlook for strong, profitable growth as we diversify and develop our business.

Net loss attributable to Hippo, a $60 7 million or <unk> 11 per share compared to a net loss of $54 1 million or <unk> 60 per share in the prior year quarter.

Adjusted EBITDA was a loss of $46 million versus a loss of $26 1 million in the year ago quarter.

We remain confident in our outlook for strong profitable growth as we diversify and develop our business to summarize our guidance for the year, we expect overall PGP and the range of $800 million to $820 million.

Stuart Ellis: To summarize our guidance for the year, we expect overall TGP in the range of $800 to $820 million.

Revenue to reach $140 million to $142 million and barring major catastrophes, our full year 2022 gross loss ratio under 100% down from 138% from 2021 and on track for further material improvements.

Stuart Ellis: revenue to reach $140 to $142 million, and barring major catastrophes, a full-year 2022 growth-loss ratio under 100%, down from 138% for 2021, and on track for further material improvements. And now let's pass it back to Asaf.

I'd now like to pass it back to your thoughts for closing remarks.

Thank you Stuart.

Asaf: Thank you, Stuart. At a time where the world faces multiple challenges, we at HIPAA understand that our homes take on an even deeper meaning.

At the time, where the world faces multiple challenges we at <unk> understand that are home to take one and even deeper meaning.

Asaf: Our vision of protecting the joy of home ownership has never been more important, and we are energized by the progress we are making. We've assembled a world-class team, and we are building momentum across all of our strategic priorities. I am proud of what we accomplished in 2021, but even more excited by the promise of 2022 and behind. With that, we are happy to take your questions.

Our vision of protecting the joy of homeownership as never been more important and we are energized by the full disclosure, making we've assembled the world class team and we are building momentum across all of our strategic priorities I am proud of what we accomplished in 2021, but even more excited by the promise of 2022 and behind with that.

Going to take your questions.

Speaker Change: Certainly, if you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered.

Certainly if you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by Tim again.

Susan.

As a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered.

The first question is from the line of Michael Phillips with Morgan Stanley You May proceed.

Speaker Change: The first question is from the line of Michael Phillips with Morgan Stanley , you may proceed.

Michael Phillips: Great. Thanks, everybody. And good evening, or good afternoon. Let me start off with a quick numbers question, and then we'll go into a couple other ones. The first numbers question is on your gross loss ratio, the 89 percent. You know, you broke it down for us in the cats and the large loss and the attritional. But I assume the attritional of the 53, that includes the 13, right? So, maybe if we net that out, the attritional, true attritional is 66. Is that correct?

Great, Thanks, everybody and good evening or good.

Good afternoon.

Let me first off with a quick numbers question and then we'll go into a couple of other ones, but the first numbers question is on your gross loss ratio of the 89%.

You broke it down for us in the cats and the large loss.

The attritional, but I assume the attritional of the 53 that includes the 13 right. So maybe if we net that out the Attritional true Attritional is 66 is that correct.

Hey, Mike This is Stuart.

Michael Phillips: Hi, Mike, this is Stuart. The, uh, no, the large losses...

Now the large losses.

Sorry the.

Stuart Ellis: Sorry, the large losses and the PCS cat events and the other attritional, those are mutually exclusive.

The large losses and the.

Tcf cat events and the other attritional those are mutually exclusive.

So the numbers in the RF and the shareholders, whereas the 13.

Stuart Ellis: So, the numbers in the correct in the Charlotte. Yeah. So where's the thirteen? I guess where do we put the thirteen? Yeah, they do. So, but where's the thirteen?

Where do we put the 13.

Yes, they do so but where is the 13.

The question.

<unk> is part of the 89 does that occur I'm not sure I can we can take it offline.

Speaker Change: 13 is part of the 89, is that correct? That's right. We can take it offline. Can you?

Okay.

Speaker Change: Can you repeat the question? I'm not sure I heard it right. Yeah, sure. So 25, 11 and 53, that's your 89, but somewhere buried in those in those numbers, it's only not the 25 or the 11, but probably the 53 is a negative 13.

Can you repeat the question Im not sure I heard right, yes sure. So.

25, $11 53, Thats Youre 89.

But somewhere buried in those in those numbers, that's really not the 25 of the 11, but probably the 53 is a negative 13.

Speaker Change: Oh, yeah, yeah, it's across all categories.

Yes, Thanks, Brian yes, its across all categories.

Okay. Okay, okay, okay, great. Thanks.

Speaker Change: Okay, okay, okay, cool. All right, thanks. That's all the numbers question was. So can we talk, I guess, on your channel?

That's all the numbers question was so can we talk I guess on all your channels.

Speaker Change: Lots of positive talk on the profitability of the builder channel. I guess I want to see if you can compare how you think about your different partnership channels, builder versus the financial services companies, in terms of profitability, in terms of growth potential, in terms of overall market TAM that these both have.

Lots of positive talk on the profitability of the builder channel.

So I wanted to see if you can compare how you think about your different partnership channels builder versus the financial services companies in terms of profitability in terms of growth potential in terms of overall market Tam that you. Both have I guess correct me if I'm wrong I think of the financial service like the Pennymac examples as more of a potential bigger size market, but maybe not.

Speaker Change: Correct me if I'm wrong, I think of the financial services like the Teddy Mac examples as more of a potential bigger size market, but maybe not growth.

Growth.

Speaker Change: Whereas the builder one, maybe a smaller TAM, but possibly bigger growth and profitability. So, you kind of want to mesh through all that in your partnership.

Whereas the builder, one maybe a smaller tam, but possibly bigger growth and profitability. So just kind of wanted mesh through all that and your partnership channels.

Yes, Hi, this is a stop Mike thanks for the question.

Speaker Change: Yeah, hi, this is a stop Michael. Thanks for the question.

Speaker Change: Let me start eye level and kind of explain our view on the partnership.

Let me start high level and kind of explain our view on the partnership channel.

Speaker Change: So the partnership channel is coming from this view that for many people, they actually never buy home insurance in their mind. What they do buy is they buy a home. And if you get a home, then you usually need a mortgage, you need a mortgage, you need a book of insurance. So that's how the flow basically in people's mind goes.

So the partnership channel is coming from this view that's for many people they actually never buy home insurance in their mind when they do buy as they buy a home and if you get it home than you usually need a mortgage you need a mortgage you need proof of insurance. So that's out of the slow basically in People's mind goes and our view is that we want to have an omnichannel kind of strategy and support.

Speaker Change: And our view is that we want to have an omnichannel kind of strategy and support people whenever they, they basically want to purchase the policy. So.

People whenever the.

They basically want to purchase a policy. So the partnership track is about supporting people into <unk>.

Speaker Change: The partnership track is about supporting people in the cycle of purchasing a home. So we work with realtors, we work with mortgage originators, mortgage services, title companies, and Builders is one of these things. Right, as you stated, some of them that you view as more financial than they might be bigger in scale in some ways, but the attachment is different.

Cycle purchasing a home so we work with very little as we worked with mortgage originators mortgage service sales title company and build one of these things right. As you stated some of them that you view as more financial.

Didn't then they might be bigger in scale in some ways, but the attach is different than that.

Speaker Change: and the risk that we get is slightly different. And we have a customized solution for each and every one of them, specifically for the builders, for instance.

And the recently get is slightly different and we have a customized solutions for each and every one of them specifically for the business for instance.

Speaker Change: So builders have their own challenges, which is different than other people's challenges. There's usually a data deficiency, for instance. So what I mean is, if you're buying a property in a certain community, you don't even have an address.

So buildup have their own challenges, which has different download people change. It does usually a data deficiency bullington. So what I mean is if you're buying a property in a certain community you don't even have an address you don't know exactly the square foot. There's a lot of inflammation that is missing in that fund.

Speaker Change: You don't know exactly the square foot, there's a lot of information that is missing in that font.

Speaker Change: And then you have very limited information on about the potential tenant.

And then you have very limited information about the potential tenants.

Speaker Change: And there's a lot of these components that create some issues for other standard insurance companies when they try to attach the policy. On the other side.

There's a lot of these components.

Some issues for four other standard insurance companies when they try to attach it.

On the other stuff.

Speaker Change: This is a brand new home, so there's a lot less potential back losses that are hidden someplace.

This is a brand new home. So there is a lot less potential back losses that are hidden someplace.

Bill does gives warranty on the consumption.

So anything thats going to happen in the foreseeable years is actually going to be covered by the buildup. It's a brand new community. So for instance, there is no overarching tree.

Speaker Change: So, anything that's going to happen in the first several years is actually going to be covered by the build-out. It's a brand new community. So, for instance, there's no overarching tree or a 20-foot tree that is overarching your home that might fall. Everything is brand new. The piping works. The sewage works. And it lowers the entire risk of the entire community.

Only 20 foot treated these overarching your home that might fall everything is brand new the piping works the sewage works and its and.

And its lowest the entire risk of the entire community and Bill does have with full knowledge of the rebuilding cost of it each and every one of the home. So what we've done in April for instance for the builders with them. We built a dedicated products that take all of these points into consideration. It has bought a couple of as you said in April five product suites and all payroll.

Speaker Change: and builders have a full knowledge of the rebuilding cost of each and every one of the homes.

Speaker Change: So what we've done in April , for instance, for the builders, we've built a dedicated product to take all of these points into consideration. It has border coverage, it's an HO5 product, so it's an all-parallel.

Speaker Change: It has more correct price for the specific risk that the builder has, so it's better for the customer, and it has higher attach rate that is beneficial for the builder.

It has more correct price for this specific risk that the building has so it's better for the customers and it has higher attach rates that is beneficial for the builders.

Speaker Change: There is a unique data integration with the builder of the specific data. There is specific integration with the sales team on the ground. So the sales associates can actually offer something which is a lot more comprehensive and beneficial for the customer. And what we're seeing is that, uh, I would say that it's one of our fastest growing products and channels.

There is a unique data integrations with the build of the <unk>.

Specific data that is specific integration with our sales team on the ground. So the sales associates can actually offer something which is a lot more comprehensive and beneficial for the customers and what we're seeing is that I would say that it's one of our fastest growing products and channels.

Speaker Change: And so, just as an example, when we started working with Lenar, the attach rate of these products were around, hovering around 40%. Now, what we're seeing with Lenar and some of our other builders that we have, is an opt-in rate of around 90% in some of the regions, and an attach rate, which is getting close to the 70%, and we're very confident it's actually going to grow. So, in short,

And so just as an example, when we started working with Linda the attach rate of these products will around offering around 40% now what we're seeing with Lenovo and some of the other builders that we have is an opt in rate of around 90% in some of the region and an attach rate, which is getting closer to 70% in <unk>.

Very content and it's actually going to grow so in short.

Speaker Change: This entire unique strategy is relatively unique. You need to have very, very strong data and technology underneath to support it. You need to have API that attach to the different systems in place. By the way, those regulatory and compliance components, some of them you need, those REST compliance, some of them you don't have. So it's a lot of unique solutions that come into play.

This entirely unique strategy is is relatively unique you need to have very very strong data and technology underneath to supported you need to have API that attached to.

So the different systems in place by the way the regulatory and compliance components. Some of them you need those breastbone compliance some of them you don't have a lot of unique solutions that come into play.

Speaker Change: It's one of our fastest growing channels and a profitable one for us. So we're gonna continue announcing more and more of the partnership in the future and we're gonna double down on it.

It's one of our fastest growing channel and a profitable one for us. So we're going to continue announcing more and more of the partnership in the future and we're going to double down on it.

Hey, Mike This is Scott.

Speaker Change: Hey, Mike, this is Rick. I wanted to clarify something on your first question to Stuart, which Stuart answered correctly, but I want to make sure it resonates with you with a little more detail.

Thank you I wanted to clarify something Hey, Rick.

I wanted to I wanted to clarify something on your first question to Stuart, which Stewart answered correctly, but I want to make sure. It resonate with you with a little more detail. So the positive development on the reserve release. The 13 points you were talking about that was not just attritional I think you inferred what the attritional loss ratio would be as a result.

Rick: So the positive development on the reserve release, the 13 points you were talking about, that was not just attritional. I think you inferred what the attritional loss ratio would be as a result. That's, as Stuart said, that's across all perils. Let me give you a specific example. Winter Storm Uri was a unique event and it had a different reporting pattern than other events. So as the year went on, we were seeing positive development across all perils, not just attritional perils.

<unk> said thats across all perils, let me give you a specific example winter storm <unk> was a unique event and it had a different reporting pattern than other events. So as the year went on we were seeing positive developments across all perils not just attritional apparel.

Speaker Change: Okay. No, thank you, Rick. That's helpful. Appreciate that. I guess my last one, a follow-on to that last answer from Asaf. You touched on it a bit, and you touched on it before. I guess one of the things we get a lot is, gosh, these guys are doing this great partnership thing, and it's really cool, but, I mean, why can't Allstate do that? Why can't Travers do that, and won't they do it more successfully and faster? So what would you say to that? Because it's a question that comes up quite a bit.

Okay no. Thank you that's helpful. I appreciate that.

I guess the last one to follow on to that last answer from us.

You touched on it a bit and you touched on it before I guess one of the things we get a lot is gosh. These guys are doing this great partnership thing and its really cool, but I mean, what can also do that why can't Roberts do that in Q1.

They do it more successfully and faster so what would you say to that because that's a question that comes up quite a bit.

Yes.

Speaker Change: Yeah, a couple of things. First one is what we're seeing now is that insurance companies in general, it's probably one of the most severe channel conflicts that you've ever seen.

A couple of things first one is what we're seeing now is that.

Insurance companies in general, it's probably one of the most severe channel conflicts that you've ever seen so usually what happen is if one wants to offer the entire deal is that deal going to direct the traffic to Joe Schmo leaves in main street in the southern cone and to do something which is holistic that takes care of that.

Speaker Change: So usually what happens is if State Farm wants to offer, their entire deal is that they're going to direct the traffic.

Speaker Change: to Joe Schmo, who lives in Main Street in a certain corner, and to do something which is holistic, that takes care of, you know, that you're attaching stakes on, and you don't attach the specific agent is something which is conflicting. So we're doing something which is holistic. You're always gonna get the HIPAA experience. It's not the specific agent that has to do with it. So we're not directing to a specific agent. We're directing to HIPAA, and we're taking care of that. The second thing, as I said,

Youll attaching stakes, Tom and you don't attach this specific agent is something which is conflicting so we're doing something which is holistic you're always going to get the equal experience. It's not the specific agent that has to do with it. So we're not directly into a specific agent will directly to <unk> and we're taking care of that the second thing as I said.

Speaker Change: Different companies have different infrastructure, different data sources, unique compliance regulation and needs, and it's not a trivial thing to actually fit it.

Different companies have different infrastructure different data sources unique compliance.

Regulation and needs and it is not a trivial thing to actually pivot what pennymac has and what home. All point has is different than what chase has and what blend has encompass has a different touch point in a different customers different customers different systems different cause.

Speaker Change: PennyMac has and what HomePoint has, it's different than what Chase has and what Blend has. And Compass has a different touch point and a different customer. Different customers, different systems, different products, different companies have a very unique company. You need to remember that its essence, and that's what we view EPO, it's an insurance company. So there is the insurance piece, but there's a full technology piece underneath it.

<unk> different companies has a very unique company you need to remember that in essence, and Thats, what we view equal its and ensure the company. So that is the insurance book.

There was a full technology piece underneath it.

Speaker Change: We're sitting now in Palo Alto, and it's in the heart of Silicon Valley, and we need to have a certain level of engineers, a certain level of data scientists, and we need to match and cater to all of these needs of the different systems, and it's not a trivial thing. It's not using a third-party system. It's using our own system, our own policy management system, and it's never a copy-paste. It's never one standard API. There's a lot of integrations, and this is something that we're...

We are sitting now in Palo Alto and it's in the heart of Silicon Valley, and we need to have a certain level of engineers, a certain level of data scientists and we need to match and cater to all of these needs of the different systems and it is not a trivial thing it's not using a third party system using our own system on policy management system and the <unk>.

It's never a coffee pasted. Nevertheless, one standout API does a lot of integrations and this is something that we've.

Speaker Change: We take a lot of pride in any point. We're very good at. So it's not a trivial thing to just attach.

We've taken a lot of pride in any point of it was really good at so it's not a trivial thing to just attach it.

Speaker Change: I'll add one thing. We know from our experience with builders like Lenar that the performance that we've been able to generate for them in terms of detach rates, opt-in rates, are meaningfully higher than they were before we started. So it isn't that other companies aren't.

And Mike This is Stuart I'll add one thing we know from our experience with builders like when are that the performance that we've been able to generate for them in terms of attach rates up and rates are meaningfully higher than they were before we started so it isn't that other companies aren't attempting to do that through other agencies and other things. It's just.

Speaker Change: attempting to do this through other agencies and other things. It's just that the things that Saf talked about, you know, the technology that we have and our ability to work in an iterative way with these partners, it just results in better performance.

Ed.

The things that <unk> talked about.

The technology that we have and our ability to work.

Iterative way with these partners.

It just results in better performance.

Okay. Thank you guys I appreciate that.

Yes.

Thank you Michael.

Speaker Change: Thank you, Mr. Phillips.

Thank you Mr Phillips.

Speaker Change: The next question is from the line of Yaron Kinar with Jeffries. You may proceed.

The next question is from the line of you Ron Qunar with Jefferies. You May proceed.

Thank you and good afternoon everybody.

Yaron Kinar: Thank you, and good afternoon, everybody. First question goes back to the TGP grows.

First question goes back to the GGP growth in South I think you mentioned that you were seeing more significant growth coming from the partnership channel.

Yaron Kinar: I think you mentioned that you were seeing more significant growth coming from the partnership channel. Can you maybe help us think through?

Could you maybe help us think through where.

Maybe if we think of each of the channels that you have.

Yaron Kinar: Maybe if we think of each of the channels that you have, prioritization of growth or where you see the most growth coming.

Organization of growth or where you see the most growth coming from over the next year.

From highest released.

Sure Let me take a first stab and then I'm sure that is still a kid can add some components.

Speaker Change: Sure, let me take a first stab and then I'm sure that you can add some components.

We have an omnichannel approach.

And while we are seeing in some the different periods of time, we're going to see different growth in different channels. So when there is an increasing cost on the direct to consumer than we might lower that and we're going to double down on some other areas and when we are seeing a change in more I would say appetite by some of the financial partner.

Speaker Change: And while we're seeing, in different periods of time, we're going to see different growth in different channels. So when there is an increasing cost on the direct-to-consumer, then we might lower that, and we're going to double down on some other areas. And when we are seeing a change and more, I would say, appetite by some of the financial partners to actually double down more on these things, then we're going to work closer with them. So it might change over time.

So actually double down more and these things than when it was going to.

Work closer with them so it might change overtime.

Speaker Change: What we're seeing now is enhanced growth on the partnership and slightly less growth on the producer side.

What we're seeing now is a bit more is enhanced growth on the partnership and slightly less growth on the producer side, but it keeps on evolving almost on a daily or weekly basis, I would say that the end state of what were probably going to get is we call it to sell to sell than it does so with that of our business is going to come from direct to consumer.

Speaker Change: But it keeps on evolving almost on a daily or a weekly basis. I would say that the end state of what we're probably going to get is, we call it a third, a third, and a third. So a third of our business is going to come from direct-to-consumer. A third of our business is going to come from producer. And a third of our business is going to come from partnership. But it doesn't mean that at any given point, it's always going to be the same breakdown.

Some of our businesses is going to come from producer and a third of our business is going to come from partnership but it doesn't mean that at any given point is always going to be the same breakdown.

Speaker Change: But we're very bullish on all of these things. And what we're seeing right now is that the partnership is going really, really fast. Don't forget that at the end of the day, also, it started from the smallest base for us.

But we are very bullish on all of these things and what we're seeing right. Now is that the partnership is what's going to really really fast don't forget that at the end of the day also was it started from the smallest base for us.

Speaker Change: So producers was the largest, and the second largest was direct-to-consumer, and the third largest was the partnership, and what we're seeing is that channel is picking up significantly.

<unk> was the fact it was the largest in the second largest was direct to consumer and the third largest producer with the partnership and what we're seeing is that.

Channel is picking up significantly.

Speaker Change: Got it. That's helpful. And then if I think about.

Got it that's helpful and then if I think about.

Speaker Change: commissions or fees more in the independent agency channel versus maybe the partnership channel, are those roughly similar? And if not,

Commissions or fees more in the independent agency channel versus maybe the partnership channel are those roughly similar.

And if not do you account for that in your pricing.

Price of product.

Yes, it is difference predominantly because of structure.

Speaker Change: and how we actually set up the partnerships. So a traditional independent agency would have a higher commission rate than our partnerships because we generally do these through joint ventures with the partnerships.

And how we actually set up the partnerships so.

Traditional independent agency would have a higher commission rate than our partnerships because we generally do these through joint ventures with the partnership so it is not the same.

Speaker Change: So it is not the same and there's more value add that we get when we are doing the joint venture partnerships. As an example.

And there is more value add that we get when we are doing the joint venture partnerships as an example.

Speaker Change: When a customer buys a Lenar home, and they're happy with the Hippo product within the Lenar home, the next question they ask is, well great, can you help me with car insurance?

When a customer buys a <unk> in our home and Theyre happy with the Hippo products within the <unk> home. The next question. They ask is well great can you help me with car insurance and our answer is absolutely. We can we are happy to cross sell somebody else's manufactured product in the agency that we partner with when are on.

Speaker Change: And our answer is absolutely we can't. We are happy to cross sell.

Speaker Change: somebody else's manufactured product in the agency that we partner with Lenar on. So it creates an opportunity to earn revenue, non-risk-based fee revenue, alongside the risk-based homeowner's revenue for selling the house.

So it creates an opportunity to earn revenue non risk based fee revenue alongside the risk based.

Homeowners revenue for selling multiple products.

Speaker Change: Yeah, this is George. You're not ready to run. Sorry. Excuse me.

Yes. This is Stuart.

I'm, sorry, excuse me.

One thing to add there on the independent agencies.

George: One thing to add there, on the independent agencies, we do have a lower renewal commission than we do on new business commission. So as the book of business matures, the overall

We do have a lower renewal commission than we do on new business commissions, so as the book of business matures.

The overall.

George: you know, percentage of fees or the percentage of premium will decline gradually.

Percentage of fees as a percentage of premium will decline gradually.

Okay got it.

Speaker Change: One quick numbers question, if I can, can you maybe talk about...

One quick numbers question, if I if I can can you maybe talk about the prior period development in.

Speaker Change: prior period development and the cat losses.

And the cat losses on a net basis as well.

Sorry.

Speaker Change: I'm sorry, we couldn't hear you at the last part of your question.

We can hear you are the last part.

The last part of your question.

Speaker Change: So, the numbers you provided for both catastrophes and for the prior period of development were both on a growth basis. Could you offer those on a net, please, net of returns?

So the numbers you provided for both catastrophe for the prior period development, where both on a gross basis could you walk through those.

Sure.

Net of reinsurance.

Yes, I think we may need to get back to you on that.

Okay.

Okay.

I'll re queue. Thank you.

Thank you.

Thank you Mr Kenai.

Speaker Change: The next question comes from the line of Matt Carletti with JMP. You may proceed.

The next question comes from the line of Matt <unk> with <unk>.

J M P.

You May proceed.

Hey, Thanks, good afternoon.

Matt Carletti: First question, I wanted to talk about the

First question I wanted to talk about.

Matt Carletti: the loss ratio guidance for 2022, and could you put some color around it in terms of

The loss ratio guidance for 2022.

And could you give some color around it in terms of maybe what we should expect from an attritional basis.

Matt Carletti: maybe what we should expect from a nutritional basis. So obviously peeling off the large losses in the cat.

So absolutely peeling off the large losses in the cat.

Speaker Change: you know, it was 53 Q4, 54 for the full year, so pretty similar. As we go throughout, I understand your comments about not expecting quarter-by-quarter improvement, but as we sit at the end of 22, should we expect improvement in that number? And any more color you can provide there would be helpful. Thank you.

It was 53 Q4 or <unk> 54 for the full year, so pretty similar as we go throughout I understand your comments about not expecting quarter by quarter improvement, but as we as we said at the end of 'twenty. Two should we expect improvement in that number and any more color you can provide there would be helpful. Thank you.

Speaker Change: Yeah, no problem, Matt. This is Stuart. I think there's a couple of things that are going on. One of the reasons that, as you rightly pointed out, we do have volatility in the weather over the course of the middle of the year, so when we think about...

Yes, no problem, Matt This is Stuart.

Thank you.

There's a couple of things that are going on.

One of the reasons that.

As you rightly pointed out we do have volatility in the <unk>.

Weather over the course of the middle of the year. So.

When we think about sequential improvement in loss ratios, while our book is still concentrated in certain areas that have shown volatility in the second.

Stuart Ellis: sequential improvement in loss ratios while our book is still concentrated in certain areas that have shown volatility in the second and the third quarters.

And the third quarters, it's a little bit hard to tell.

Speaker Change: It's a little bit hard to imagine that.

Imagine that.

Speaker Change: You know, it's just going to be a smooth, steady march downward. That said, relative to 2020, we do expect.

It's just going to be a smooth steady march downward.

That said relative to 2020, we do expect.

Speaker Change: significant improvement year-over-year, we'll have more visibility into what the ultimate loss ratio is going to be in 2022 as we make our way through the year. That volatility will decline. And as we grow and add the geographic diversity to the book and to the portfolio, that weather-related volatility will become a lower and lower source of variance on that.

Significant improvement in year over year, we will have more visibility into what the ultimate loss ratio is going to be in 2022, as we make our way through the year.

Somebody will decline and as we grow and add that geographic diversity to the to the book into the portfolio that weather related volatility will become a lower and lower source of variance on that.

With respect to the mix jobs.

Speaker Change: With respect to the mix of attritional and cat-oriented losses, that's also something that will...

Attritional and cat oriented losses, that's also something that will have some variability over the course of the year we are.

Speaker Change: have some variability over the course of the year. We are, as we mentioned in the earlier part of the call, even within states like Texas.

As we mentioned in the in the earlier part of the call even within states like Texas, We have shifted our regional concentration in Texas is a very big states away from the northern part of the state, where we've had historically higher hail losses.

Speaker Change: we have shifted our regional concentration, Texas is a very big state, away from the northern part of the state where we've had historically higher hail losses.

Speaker Change: to other parts of the state, and then across states, you know, as we build that geographic diversity in the portfolio, the specific contribution of weather and cat-related events to the premium, that's going to change over the course of the year as the mix of our states changes.

Other parts of the state.

And then across states as we as we build that geographic diversity in the portfolio the specific contribution whether in cat related events to the premium.

That's going to change over the course of the year as the mix of our states changes yes.

Speaker Change: Yeah, just, uh, Matt, just a couple additions to that. Um, first of all, as you know,

Just Matt just a couple of additions to that.

First of all as you know.

Speaker Change: we've increased the speed and number of rate filings that will take effect throughout the year. And rate filings dramatically help attritional loss ratio. So as those filings get approved by the various regulators, that will show some inconsistent improvement nonetheless, but inconsistent improvement, depending on when those rate filings go live and as the premiums for those increased rate filings start to earn out. Secondly, is steward.

We've increased the speed and number of rate filings that will take effect throughout the year and rate filings dramatically help attritional loss ratio. So as those filings get approved by the various regulators that we will show some inconsistent improvement nonetheless, but inconsistent improvement depending on the.

When those rate filings go live and as.

The premiums for those increased rate filing and start to earn out secondly, as Stuart mentioned.

Stuart Ellis: understanding that our loss ratio currently is

Understanding that our loss ratio currently is.

As.

Stuart Ellis: is based on some geographical concentrations that we have shown meaningful improvement on over the last few years. As we continue to grow geographically, the number of states we have that have higher weather-related losses will shrink.

It's based on some geographical concentrations that we have shown meaningful improvement on over the last few years.

As we continue to grow geographically the number of states, we have that have higher weather related losses will shrink.

Stuart Ellis: And those that have higher attritional losses will increase because if you take a state with very little weather, of course, the attritional loss ratio is higher. And we are, we are not fully diversified yet in states that provide a balance that that will shift and change as time goes on.

And those that have higher attritional losses will increase because if you take a state with very little weather of course, the attritional loss ratio was higher and we are we.

We are not fully diversified yet in states to provide a balance that will shift and change as time goes on.

Speaker Change: Very helpful. And one other one, if I could, just a high-level question. I mean, I think hearing you guys write, I mean, I think the very high-level message is you expect to still grow very strongly, obviously, while at the same time what we're just talking about, you know, improving your loss ratio. Yeah, that's a difficult balance at times, so can you talk a bit about how you expect to balance those two goals and, you know, meet those goals?

Very helpful.

One other one if I could just a high level question.

I think if I'm hearing you guys right I mean I think the.

Very high level messages, you expect to still grow very strongly.

Honestly, while at the same time, what we're just talking about improving our loss ratio.

Yes, that's a difficult balance at times, so can you talk a bit about.

How you expect to balance those two goals.

And meet those goals.

Yes, yes, Sir.

Speaker Change: Yeah, yeah, sure. So I think first thing it's important for all of us to understand about the way we think about this is that we're focused on delivering thoughtful, profitable growth.

So I think first thing that's important for all of us under understand about the way. We think about this is that we're focused on delivering thoughtful profitable growth.

Speaker Change: And at this point, we know that the entire industry is taking rates due to inflationary pressures.

And at this point, we know that the entire industry is taking rate due to inflationary pressures.

Speaker Change: And, you know, we've got a lot of filings that are in process across the country.

And.

We've got a lot of filings that are in process across the country as we get comfortable that we have rate adequacy in that we are properly calibrated from a pricing standpoint, not too high not too low.

Speaker Change: As we get comfortable that we have rate adequacy and that we're properly calibrated from a pricing standpoint, you know, not too high, not too low in various parts of the country, it's going to get easier and easier for us to lean harder into growth over the course of the year. But I would say that.

In various parts of the country, it's going to get easier and easier for us to lean harder into growth over the course of the year.

But I would say that Hippo may have some unique advantages going into 2022.

Speaker Change: HIPAA may have some unique advantages going into 2022 from a growth standpoint, and those fall into a few buckets, right? We're entering large new states that we're not currently in. We're able to roll out new products in our existing states.

From a growth standpoint, and those fall into a few buckets right. We are entering large new states that we're not currently in.

We're able to roll out new products in our existing states, we've talked already on the call about the strong partnerships, we have with homebuilders and financial institutions that give us access to what we believe is positively selected risks.

Speaker Change: We've talked already on the call about the strong partnerships we have with homebuilders and financial institutions that give us access to what we believe is positively selected risk. And we know that bringing the new geographic diversity to the portfolio

And we know that bringing the new geographic diversity to the portfolio.

Speaker Change: We expect that that will bring the weather-related volatility down.

We expect that that will bring the weather related volatility down so we.

Speaker Change: We see ourselves as a, because of the platform we've built, we have a very, very wide top of funnel, and so we can bring growth to the business.

We see ourselves as the.

Because of the platform. We built we have a very very wide top of funnel.

And so we can bring growth to the business, while optimizing loss ratio.

Speaker Change: while optimizing loss ratio, and so we see the benefits of that growth in the reduction of volatility from weather and the loss ratio as well.

And so we see the benefits of that growth in the reduction of volatility from weather in the loss ratio as well as we as we mentioned.

Speaker Change: Yeah, as we as we mentioned, you know, our guidance for 2022 is a sub 100 loss ratio. I just want to make a clear point that our intermediate term.

Our guidance for 2022 is a sub 100 loss ratio I just want to make it clear point that our intermediate term goal is to get the loss ratio to industry norms, which is within the sixties, while continuing to grow so our targets.

Speaker Change: is to get the loss ratio to industry norms, which is within the 60s, while continuing to grow.

Speaker Change: So our target as an intermedium goal is within the 60s while still demonstrating healthy growth.

<unk> is an intermediate goal is within the <unk>, while still demonstrating healthy growth.

Great. Thanks for the answers very helpful.

Thank you Mr Carlotti.

Speaker Change: The next question is from the line of Alex Scott with Goldman Sachs, you may proceed.

The next question is from the line of Alex Scott with Goldman Sachs. You May proceed.

Alex Scott: Hi, good afternoon. First one I had is just on the reinsurance renewals. Could you give us a feel for how the 2 thirds that was repriced could impact just the reinsurance costs, and if there's any sort of noticeable impact to loss ratios we should consider?

Hi, Good afternoon first one I had.

On the reinsurance renewals could you give us a feel for how the two thirds. There was re priced could impact just the reinsurance costs and if there is any sort of noticeable impact to loss ratios we should consider.

Speaker Change: Yeah, Stuart, I'll take that, the first part of that, and then Rick, feel free to add anything. Our seating commission on the annual reinsurance treaties, very similar to what it was in 2021. And while we're not disclosing the specifics of the individual contracts we have with reinsurers, we do feel like it was a successful renewal.

Stuart I'll take the first part of that and then Rick feel free to add anything.

Our ceding commission on the annual reinsurance treaties very similar to what it was in 2021.

And while we're not disclosing the specifics of the individual contracts, we have with reinsurers.

We do feel like it was a successful renewal.

Speaker Change: We mentioned in the prepared remarks that.

We mentioned in the in the.

In the prepared remarks that.

Speaker Change: We do have some loss participation features.

We do have some lots participation loss participation features.

Speaker Change: And we buy XOL protection to protect us from large losses.

And and we buy X ol protection to protect us from large losses.

Speaker Change: So we do feel like, you know, we despite the fact that.

We do feel like we despite the fact that.

Speaker Change: It is a hardening reinsurance market. We have the confidence of our reinsurance partners and that we're executing on the plans that we've discussed with them. And we feel confident that we have strong protection for the balance sheet.

It is a hardening reinsurance market.

The confidence of our reinsurance partners and that we're executing on the plans that we've discussed with them.

And we feel confident that we have strong protection to the balance sheet.

Speaker Change: Yeah, just to just to emphasize what Stuart was saying is that this 2022 treaty was oversubscribed.

Just to just to emphasize what Stuart was saying is that this 2022 treaty was oversubscribed.

Speaker Change: And keep in mind that every one of our reinsurance partners closely examines our underwriting practices, our use of technology, our ability to incorporate inflation guards and inflation accelerators at a rapid pace. And we recognize, as they do, we are long-term partners.

And keep in mind that every one of our reinsurance partners closely examines our underwriting practices our use of technology, our ability to incorporate inflation guards and inflation accelerators at a rapid pace and we recognize as they do we are long term partners with.

Speaker Change: without a level of trust with our reinsurers, we will not be successful. And we have built that trust with them and their view of what we are doing is one that created additional reinsurers joining our panel in an over-subscription scenario.

Ouch, a level of trust with our reinsurers, we will not be successful.

And we have built that trust with them and their view of what we're doing is one that created additional reinsurers, joining our panel and an oversubscription scenario.

Yes.

That's really helpful. Thank you.

Speaker Change: That's really helpful, thank you. The next question I have is just on retention. It looked really strong this quarter. Is it fair to say that's a good indication of how things are going in terms of repricing action? I know there was, you know, I think some investor nervousness around just the size of the

Next question is just on retention.

Looked really strong this quarter.

Is it fair to say that's a good indication of how things are going in terms of repricing action I know there was.

I think some investors.

Nervousness around just the size of that.

Speaker Change: the rate hike that was being taken in California, but can we take this to mean that early indications are that's not affecting retention? And any comment on how you'd expect repricing to affect retention in 2022 more broadly?

The rate hike that was being taken in California, but can we take this to mean that the early indications are that is not affecting retention and any comment on how you.

For your pricing to affect retention in 2022 more broadly.

Speaker Change: Yeah, I think I think that's accurate. And the reality is the industry is is taking a lot of rate. We are an inflationary cycle states like California. We're not the only one. Lots of folks are are taking rate. One thing that's relevant, I think, is that we've launched a more robust pricing model than we had before. And we are better matching premium to risk.

Yes, I think I think that's accurate and the reality is the industry is taking a lot of rate that we are in an inflationary cycle states like California, we're not the only one lots of folks are are taking rate. One thing. That's relevant I think is that we've launched a more robust pricing model than we had before and we are better.

Matching premium to risk.

Speaker Change: And it's not a situation where everybody's going to get rate increases. We mentioned in our prepared remarks.

And it's not a situation where everybody is going to get rate increases we mentioned in our prepared remarks.

Speaker Change: some of what was happening in Texas. We do have customers, because we have more granulated pricing and segmentation, our use of our multi-carrier strategy using the different underwriting companies.

Some of what was happening in Texas, we do have customers, because we have more granulated pricing and segmentation our use of our multi carrier strategy using the different underwriting companies.

Speaker Change: which only affects new customers, not existing customers. We do see situations where the HIPAA risks that we're targeting, we'll see rate decreases.

Which only affects new customers not existing customers.

We do see situations, where the Hippo risks that we're targeting we will see rate decreases.

Speaker Change: So we're very pleased with the retention numbers and very optimistic that it will continue.

We're very pleased with the retention numbers and very optimistic that it will continue.

Thanks, and maybe if I could sneak one last one and then just circling back on the reinsurance were there any material changes to the amount of risk retention that you have in excess of sort of the 10%.

Speaker Change: Thanks. Maybe if I could sneak one last one in, just circling back on the reinsurance, were there any material changes to the amount of, you know, risk retention that you have in excess of sort of the 10% share that you'd take, anything we should think about there in terms of volatility that we could see associated with higher risk retention or is it, you know, fairly similar to 2021?

Sure.

Take.

Sure.

We should think about there in terms of volatility that we could see associated with higher risk retention or was it fairly.

Fairly similar to 2021.

Yes.

Speaker Change: From a quota share proportional perspective, we're actually taking a little bit less than we did in 2021, but we have instituted or initiated certain performance mechanisms on loss ratios above certain thresholds.

And from a quota share of proportional perspective, we're actually taking a little bit less than we did in 2021, but we have instituted our initiated certain performance mechanisms on loss ratios above certain thresholds.

Speaker Change: And so we are better aligning our economic models from a loss perspective with our reinsurance partners. I don't think it's a meaningful change, but it is different. We do have a very sophisticated reinsurance treaty and that sophistication allows us to protect ourselves against large losses.

So we are better aligning our economic models from a loss perspective, with our reinsurance partners I don't think its a meaningful change.

But it is different we do have a very sophisticated reinsurance treaty.

And that sophistication allows us to protect ourselves against large losses.

Speaker Change: while maintaining a capital light structure, yet demonstrating to our reinsurance partners that we are just that, we are partners. And together, we have strong beliefs that the loss ratio is not only going in the right direction but will continue to do so on a year-over-year basis.

While maintaining a capital light structure, yet demonstrating to our reinsurance partners that we are just that we are partners and together we have strong beliefs that the loss ratio is not only going in the right direction, but we'll continue to do so on a year over year basis.

Thanks.

Thank you Mr. Scott.

Thank you Mr. Scott.

Speaker Change: The next question is a follow-up question from the line of Yaron Kinar with Jeffries. You may proceed.

The next question is a follow up question from the line of Iran. Qunar with Jefferies. You May proceed.

Thanks.

Yaron Kinar: So, I wanna go back to the comment around the expected increase in.

So I wanted to go back to the comment around the expected increase in share of earnings coming from stable and recurring commissions and fee based income so.

Yaron Kinar: Does that simply mean that, you know, the example that you gave earlier of maybe getting additional fees through launching or...

Does that simply mean.

The example that you gave earlier of maybe getting additional fees through.

Launching or.

Yaron Kinar: partnering with other third party insurers.

Entering with other third party.

<unk> and maybe some of the ceding commissions that you expect those to go up does it mean that your that you may not be looking to reduce the use of reinsurance over time, because you're not necessarily expecting.

Yaron Kinar: the seating commissions, that you expect those to go up, does it mean that you may not be looking to reduce the use of reinsurance?

Yaron Kinar: portion of underwriting and earnings to go up, how should we...

The portion of underwriting.

Underwriting and earnings to go up how should we think about that.

Yes, I think I'll take that Stuart.

Speaker Change: Yeah, I think you run out. I'll take that, Stuart. I think it's

I think it's.

Stuart Ellis: I think it reflects an increased confidence that we have in the agency portion of our business and it's not, I don't think I would take that as a commentary on the way or the amount of reinsurance that we're going to be using. We do, as I think we've said before, we have the MGA, we have the insurance as a service kind of carrier business in the form of Spinnaker. We have our own agency, which allows us to sell other carriers.

I think it reflects an increased.

Confidence that we have in the agency portion of our business and it's not I don't think I would take that as a commentary on the way or the amount of reinsurance that we're going to be using.

We do.

I think we've said before we have the MGA we have the.

Insurance as a service kind of carrier business in the pharma spinnaker, we have.

Our own agency, which allows us to sell.

Other carriers policies, whether they'd be home insurance policies, our auto insurance policies.

Stuart Ellis: policies, whether they be home insurance policies or auto insurance policies, we're getting better operationally at delivering a solid experience, whether someone's buying a policy from HIPPO or through us from another carrier.

We are getting better operationally at delivering a solid experience, whether someone's buying a policy from hip or through us from another carrier.

Speaker Change: And I do have the answer to your previous question about the favorable reserve development on a net basis.

And I do have I do have.

The answer to your previous question about the.

Favorable <unk>.

<unk> development on a net basis for Q4, it was 34 percentage points favorable.

Speaker Change: Q4, it was 34 percentage points favorable.

Speaker Change: on a net basis, and on a gross basis, as a reminder, 13 points favorable. Okay.

On a net basis and on a gross basis as a reminder, 13 points favorable.

Okay.

And on the Cat side.

Do you have those on a net basis.

I don't think we've broken down.

Speaker Change: I don't think we've broken down, the reserve releases, as we said, were across all perils, so it's a broad release of reserves as we've gotten comfortable that we're properly, you know, reporting the reserves on the balance sheet.

The reserve releases as we said we're across all apparel. So it's a broad release of reserves.

As we've gotten comfortable that we are properly.

Reporting the reserves on the on the balance sheet.

Okay.

And then could you maybe.

Speaker Change: explain or walk us through the increase in the insurance-related expenses, which seems a bit more meaningful.

Screen or walk us through the the increase in the insurance related expenses, which seem a bit more meaningful this quarter, both on a year over year and quarter over quarter basis.

Yeah, I think thats.

<unk>.

Speaker Change: It's a bit of a technical answer, but I think it'll make sense when I go through it. You'll recall that we closed the Spinnaker acquisition.

It's a bit of a technical answer, but I think it will make sense when I go through it.

Youll recall that we closed the <unk> acquisition.

Speaker Change: toward the end of Q3 2020. And before the acquisition, all of the commissions that we paid to producers and partners were recognized in our P&L at a point in time. And following the acquisition, like with other items in the P&L, when we switched to 944 accounting, the commission is recognized over the life of the policy. And so in Q4 2020, the P&L only reflected

Towards the end towards the end of Q3 2020.

And before the acquisition all of the commissions that we paid to producers and partners were recognized in our P&L at a point in time and following the acquisition like with other items in the P&L. When we switch to 944 accounting. The commission is recognized over the over the life of.

The policy and so in Q4 of 2020, the P&L only reflected one quarter of the commission amortization for that group policies, whereas in Q4 of 2021, we have functionally a full year of commissions.

Speaker Change: one quarter of the commission amortization for that group of policies whereas in Q4 2021

Speaker Change: functionally a full year of commissions. This also shows up in the same way in the commission income. If you look at Q4 2021 versus Q4 2020. Happy to talk in more detail about the technical pieces of the accounting offline, but it's basically a comparability issue. Got it. Going forward, we should probably look at.

It also shows up in the same way.

And the commission income if you look at Q4 2021 versus Q4 2020, so happy to happy to talk in more detail about the technical pieces of the accounting offline, but it's basically a comparability issue.

Got it so going forward, we should probably look at this quarter's insurance expenses insurance related expenses, a reasonable run rate.

Speaker Change: I think that's right. I think, you know, we still there will be a few more quarters where it's not perfectly comparable because each of the prior quarters will need to have had a full year before it becomes fully apples to apples. But yes, I think as we think about the relationship between that variable and and the drivers, it's more stable now than it was.

I think thats right I think we still there will be a few more quarters, where it's not perfectly comparable because each of the prior quarters, we will need to have had a full year before it becomes fully apples to apples, but yes I think.

As we think about the relationship between not variable and.

And the drivers it's more stable now than it was.

Got it.

Speaker Change: uh... one last one for me uh... how much free did you uh...

One last one from me how.

How much did you.

<unk> and <unk> 21, and maybe also in full year 'twenty one.

Yeah, I don't think we have disclosed the individual rate actions that we have taken all of those of course are public information that can be pulled from the departments of insurance websites, but we have we have not broken down or or disclose.

Speaker Change: I don't think we have disclosed the individual rape actions that we have taken, although those of course are public information that can be pulled from the Departments of Insurance.

Speaker Change: Websites, but we have we have not broken down or or disclosed

Speaker Change: rate actions, also because we've begun taking rate actions and we have over the last year or so, but we're just at

Actions.

Also because there we have begun taking rate actions and we have over the last year or so but we're just we're.

We're not at the end of it there is still plenty of rate action to be taken but again those are all filed with each regulator.

Speaker Change: We're not at the end of it. There's still plenty of rate action to be taken, but again, those are all filed with each regulator. And as Rick said earlier, it's not all increases. A lot of the rate that we're filing is a calibration where certain categories of homes and kinds of risks are getting price decreases and others are getting price increases.

As Rick said earlier.

Not all increases a lot of the rate that we're filing is a calibration where certain categories at homes and.

Kinds of risks are getting price decreases and others are getting price increase.

Thank you very much.

Thank you Mr Kenai.

Speaker Change: There are no additional questions waiting at this time, so I will pass the conference over to the management team for any additional remarks.

No additional questions waiting at this time, so I will pass the conference over to the management team for any additional remarks.

Thank you.

Speaker Change: Thank you. Just wanted to close it and say thanks everybody for your time. Appreciate it. And as I concluded the other remarks.

Just wanted to close it and say thanks, everybody for your time appreciate it.

And as I concluded it.

The other remarks.

We're entering 2022 with a very confident mindset, it's not an easy time out there in the world, It's not an easy.

Speaker Change: We're entering 2022 with a very confident mindset. It's not an easy time out there in the world. It's not an easy time to be an insurance company. But with the team, with the technology, with all of the things and the growth that we're seeing, we're optimistic. And we think 2022 is going to be a stronger year for Ipoh.

Time to be an insurance company, but with the team with the technology with all of the things and the growth that we're seeing we're optimistic.

We think 2022 is going to be a stronger youll Filippo.

Thank you all for your time.

That concludes today's Hippo fourth quarter 2021 earnings call. Thank you for your participation you may now disconnect your lines.

Speaker Change: That concludes today's HIPAA 4th Quarter 2021 Earnings Call. Thank you for your participation. You may now disconnect your lines.

Speaker Change: You

Yeah.

Okay.

Okay.

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