Q3 2023 Hippo Holdings Inc Earnings Call

Yeah.

Speaker 1: Welcome everyone and thank you for attending today's HIPAA Holdings third quarter 2023 earnings call. My name is Sierra and I...

Welcome everyone.

And thank you for attending today's Hippo Holdings third quarter 2023 earnings call.

My name is Sierra and I will be your moderator today.

Speaker 1: All lines will be muted during the presentation portion of the call. There's an opportunity for questions and answers at the end.

All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.

Speaker 1: If you'd like to ask a question, press star 1 on your telephone keypad.

If you'd like to ask a question press star one like a telephone keypad.

Speaker 1: I would now like to pass the conference over to our host, Cliff Glamp, Vice President of Vesta Relations.

I would now like to pass the conference over to our host Cliff Gallant Vice President of Investor Relations.

Speaker 2: Thank you, operator. Good afternoon, everybody. And thank you for joining HIPAA's third quarter earnings uncwalk.

Thank you operator, good afternoon, everybody and thank you for joining <unk> third quarter earnings Conference call.

Speaker 2: Earlier, Hippo issued a shareholder letter announcing its results, which is available at investors.hippo.com.

Okay, but what you should a shareholder letter announcing its results, which is available at investors <unk> com.

Speaker 2: Leading today's discussions will be HIPAA's Chief Executive Officer and President Rick DeCathrin and Chief Financial Officer Stuart Ellis. Following management's prepared remarks, we'll open up the floor to questions and answers when asked about you'd be on call to a technical expression.

Leading todays discussions will be Hippo chief.

Executive Officer, and President Rick the Katherine Chief Financial Officer, Stuart Ellis fall.

Management's prepared remarks, we will open up the call to questions.

Speaker 2: 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 to the date of this presentation. Forward-looking statements include, but are not limited to, people's expectations or predictions of financial and business performance and conditions in competitive industry outlook. Forward-looking statements are subject to risk, uncertainties, and other factors that could cause our actual results to differ materially from historical results and or from our forecast

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.

Just on management's current expectations as to the date of this presentation forward. Looking statements include but are not limited to those expectations or predictions of financial and business performance and conditions and competitive industry outlook or the statements are subject to risks uncertainties and other factors that could cause our actual results to differ materially from historical results <unk> from our forecast, including those.

Speaker 2: including those set forth in HIPPO's Form 8K file today. For more information, please refer to the risks, uncertainties, and other factors discussed in HIPPO's SEC filings, in particular in the section entitled, Risk Back.

Set forth to depose form 8-K filed today for more information. Please refer to the risks uncertainties and other factors discussed in hippos, SEC filing particular sections entitled risk factors.

Speaker 2: All cautionary statements are applicable to any forward-looking statements we make whenever they appear. You should carefully consider risks and uncertainties and other factors discussed in HIPAA's SEC filings. Do not place undue reliance.

All cautionary statements are applicable to any forward looking statements, we make whenever they appear you should carefully consider the risks and uncertainties and other factors discussed in SEC filings.

Undue reliance.

Speaker 2: On forward-looking statements as HIPAA was 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 this conference call, we will also refer to non-GAAP financial measures such as total generated premium and adjusted EBITDA. Our GAAP results and description of our non-GAAP financial measures with a full reconciliation of GAAP can be found in the third quarter, 2023, Shareholder Letter, which has been furnished to the FCC and available on our website.

Forward looking statements as Hippo 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 this conference call. We will also refer to non-GAAP financial measures such as total generated premium adjusted EBITDA. Our GAAP results a description of our non-GAAP financial measures for the full reconciliation of GAAP can be found in the third quarter 2023 shareholder letter, which has been furnished to the SEC and available on our website.

Speaker 2: And with that, I'll turn the call over to Rick McCaffrey, our President and CEO .

And with that I'll turn the call over to Rick to Catherine our President and CEO.

Speaker 3: Good afternoon. Q3 2023 was hippos best quarter yet. The most predictable and profitable parts of hippo, our services and insurance as a service segment continue to drive our growth and now represent 65% of our premiums in force up from 52% a year ago.

Good afternoon Q.

Q3, 2023 was hit those best quarter yet.

The most predictable and profitable parts of Hippo, our services and insurance as a service segment continued to drive our growth and now represents 65% of our premiums enforced.

From 52% a year ago.

Speaker 3: The actions we are taking in our homeowners insurance business to lower its volatility and improve its profitability are working.

Actions, we are taking in our homeowners insurance business to lower its volatility and improve its profitability are working.

Speaker 3: Our Q3 23 adjusted EBITDA loss was HIPAA's smallest as a public company, and we are on pace to turn positive earlier than previously projected.

Our Q3 23, adjusted EBITDA loss was Hippo smallest as a public company and we are on pace to turn positive earlier than previously projected.

Speaker 3: After a challenging first half of 2023 for the US homeowners insurance industry, HIPPO has taken bold steps to position itself for a period of extended growth and profitability. In August , we temporarily paused the underwriting of most new businesses.

After a challenging first half of 2023 for the U S homeowners insurance industry.

He has taken bold steps to position itself for a period of extended growth and profitability.

In August we temporarily paused the underwriting of most new business.

Speaker 3: We're assessing our underwriting and risk appetite and only writing new business where we are very confident in its expected profitability and reduced volatility.

We are assessing our underwriting and risk appetite and only writing new business, where we are very confident and that's expected profitability and reduce volatility.

Speaker 3: For our renewal book, we're raising rates, increasing deductibles, and when necessary, non-renewing some policies.

For our renewable book, we're raising rates, increasing deductibles and when necessary non renewing some policies.

Speaker 3: While we expect to see a decline in those home insurance programs, total generated premium in 2024.

While we expect to see a decline in hippos home insurance programs total generated premium in 2024.

Speaker 3: We expect that to be driven by a disproportionate decline in exposure and volatility and a significant improvement in underwriting profitability.

We expect that to be driven by a disproportionate decline in exposure and volatility and a significant improvement in underwriting profitability.

Speaker 3: We have already begun to see the benefits of actions taken in 2022 and early 2023 to improve our loss ratio. And we expect significant...

We have already begun to see the benefits of actions taken in 2022 in early 2023 to improve our loss ratio.

And we expect significant additional improvement to come.

Speaker 3: Our consolidated gross loss ratio in the quarter was 59%, a 51 percentage point improvement over a year ago.

Our consolidated gross loss ratio in the quarter was 59% a 51 percentage point improvement over a year ago.

Speaker 3: and our net loss ratio improved even more significantly year over year, the climbing 112 percentage points to 111.

And our net loss ratio improved even more significantly year over year declining 112 percentage points to 111.

Speaker 3: HHIP's core gross loss ratio in the quarter, which excludes prior year reserve movements and PCS cats, and proves 13 percentage points to 69 percent, down from 82 percent in the prior year quarter.

H H Ip's core gross loss ratio in the quarter, which excludes prior year reserve movements and Pcs cats improved 13 percentage points to 69%.

Down from 82% in the prior year quarter.

Speaker 3: We had another outstanding quarter in our insurance as a service segment. With positive adjusted operating income of 4M dollars. An exceptional PGP growth of 72%.

We had another outstanding quarter, and our insurance as a service segment with positive adjusted operating income of $4 million.

An exceptional PGP growth of 72%.

Speaker 3: in a market with highlighted concerns about credit risk exposure.

In a market with highlighted concerns about credit risk exposures.

Speaker 3: Spinnaker continues to demonstrate strong risk management capabilities and underwriting controls while driving profitable growth.

Spinnaker continues to demonstrate strong risk management capabilities and underwriting controls, while driving profitable growth.

Speaker 3: In our fee based services segment, the success of our builder agency business is providing a repeatable playbook for our entire agency business.

And our fee based services segment. The success of our builder agency business is providing a repeatable playbook for our entire agency business.

Speaker 3: As HHIP's risk appetite narrowed, our builders agency successfully placed business with third-party carriers to keep the premium retention rate at 97% for the quarter.

As H H ip's risk appetite narrowed our builders agency successfully placed business with third party carriers to keep the premium retention rate at 97% for the quarter.

Speaker 3: At First Connect, agency appointments are up 3x, and we saw growth of more than 180% in our non-Hippo new business versus the prior year.

At first connect agency appointments are up three X and we saw growth of more than 180% and our non hippo new business versus the prior year.

Speaker 3: As we have focused our underwriting footprints and intensified our emphasis on expense control, we are announcing a significant expense reduction initiatives, which we expect to take 50 to 70 million out of our cost structure in 2024.

As we have focused our underwriting footprint and intensified our emphasis on expense control. We are announcing a significant expense reduction initiatives, which we expect to take $50 million to $70 million out of our cost structure in 2024.

Speaker 3: We expect these savings, coupled with further loss ratio improvements and growth in our insurance as a service and services segment, to result in positive adjusted EBITDA before year end 2024, turning positive earlier than we previously projected.

We expect these savings coupled with further loss ratio improvements and growth in our insurance as a service and services segment to result in positive adjusted EBITDA before year end 2024, turning positive earlier than we previously projected.

Speaker 3: Finally, I extend our condolences to many Israeli members of our HIPO family and friends and partners impacted by the horrible events over the past several weeks. Thank you. I'll now turn the call over to Stuart.

Finally, I extend our condolences to many Israeli members of our Hippo family and friends and partners impacted by the horrible events over the past several weeks. Thank you.

I'll now turn the call over to Stuart.

Speaker 2: Thanks, Rick. Our Q3 2023 adjusted EBITDA loss of $38 million was our best yet as a public company, and we expect even stronger results in the coming period.

Thanks, Rick.

Our Q3 2023, adjusted EBITDA loss of $38 million was our best yet as a public company and we expect even stronger results in the coming periods.

Speaker 2: These improvements will be driven by continued improvements to the HIPO Home Insurance Program Lofts ratio. Significant operating...

These improvements will be driven by continued improvements to the Hippo insurance program loss ratio.

Significant operating expense savings.

Speaker 2: growth in our insurance as a service segment, which is already profitable, and growth in our services business, which will turn closer to adjusted operating income positive in 2024.

Growth in our insurance as a service segment, which is already profitable.

And growth in our services business, which will turn closer to adjusted operating income positive in 2024.

Speaker 2: We now expect to be reporting positive adjusted evita earlier than the end of 2024.

We now expect to be reporting positive adjusted EBITDA earlier than the end of 2024.

Speaker 2: while affirming our expectation of minimum cash and investments of at least $350 million.

While affirming our expectation of minimum cash and investments of at least $350 million.

Speaker 2: On a consolidated basis, year-over-year growth remained strong. TGP was up 38% to $304 million, driven primarily by our most profitable and most predictable segments, which now represent the significant majority of our total business.

On a consolidated basis year over year growth remained strong TGT.

<unk> was up 38% to $304 million driven primarily by our most profitable and most predictable segments, which now represents a significant majority of our total business.

Speaker 2: Revenue was up 88% over the prior year to 58 million, primarily driven by growth in premiums earned and organic growth in both our insurance of the service and services segment.

Revenue was up 88% over the prior year to $58 million, primarily driven by growth in premiums earned and organic growth in both our insurance service and services segment.

Speaker 2: Additionally, revenue has benefited from an increase in investment income to 6 million from 3 million in the year ago quarter, as we have taken advantage of more attractive yields.

Additionally, revenue has benefited from an increase in investment income to $6 million from $3 million in the year ago quarter.

Taking advantage of more attractive yields.

Speaker 2: We will continue to push for growth in our profitable insurance as a service segment and view growth as an important lever to driving positive adjusted operating income in our services.

We will continue to push for growth in our profitable insurance as a service segment and view growth as an important lever to driving positive adjusted operating income in our services segment.

Speaker 2: Our narrower risk appetite and focus on lowering our exposure to weather will result in lower TGP and disproportionately lower loss exposure and volatility in the HIPAA Home Insurance Program segment in 2024.

Our narrower risk appetite and focus on lowering our exposure to weather or result in lower TTP and disproportionately lower loss exposure and volatility in the Hippo home insurance program segment in 2024.

Speaker 2: We've made great progress on operating expense control during the quarter. Excluding loss and loss of just an expense. Consolidated expenses were 72 million in the quarter, down from 134 million a year ago. Reduced sales and marketing expenses were the major driver, down 19 million from 29 million a year ago, while tax and development costs were 12 million versus 15 million a year ago.

We've made great progress on operating expense control during the quarter, excluding loss and loss adjustment expense consolidated expenses were $72 million in the quarter down from $134 million a year ago reduced sales and marketing expenses were the major driver down $19 million from $29 million a year ago, while tech and.

Development costs were $12 million versus $15 million a year ago.

Speaker 2: We also recently announced our decision to take additional expense savings action, including a staff reduction of up to 120 employees.

We also recently announced our decision to take additional expense savings actions, including a staff reduction of up to 120 employees.

Speaker 2: We expect these actions to drive additional annualized savings between 50 and $70 million, partially beginning in Q4 of this year.

We expect these actions to drive additional annualized savings between 50% and $70 million, partially beginning in Q4 of this year.

Speaker 2: We ended the quarter in a strong financial position with cash and investments of $558 million, down from $565 million on June 30, 2023, as our Q3 adjusted EBITDA loss was partially offset by favorable changes in working capital.

We ended the quarter in a strong financial position with cash and investments of $558 million down from $565 million on June 32023.

Q3, adjusted EBITDA loss was partially offset by favorable changes in working capital.

Speaker 2: In our services segment, our Q3 adjusted operating loss was 10 million, down from 16 million a year ago.

In our services segment, our Q3, adjusted operating loss of $10 million down from $16 million a year ago.

Speaker 2: year over year growth remains strong with TGP up 32% to 122 million and revenue up 22% to 12 million.

Year over year growth remained strong with CGP up 32% to $122 million in revenue up 22% to $12 million.

Speaker 2: The supposed agency continues to have tremendous success in the builder channel, with volumes reaching another all-time high in the quarter, despite the pressures on the broader housing economy.

As opposed to agency continues to have tremendous success in the builder channel with volumes, reaching another all time high in the quarter. Despite the pressures on the broader housing market.

Speaker 2: growth was driven by higher numbers of policies placed and higher premiums for policies.

Growth was driven by higher numbers of policies plates and higher premium per policy.

Speaker 4: Our third party premium retention rate was 97% in the quarter.

Our third party premium retention rate was 97% in the quarter.

Speaker 4: At First Connect, our digital marketplace for independent agents and carriers, we saw a year-over-year increase of more than 180% in non-HIPO new total generated premiums during the quarter despite challenging market conditions.

At first connect our digital marketplace for independent agents and carriers, we saw a year over year increase of more than 180% in non Hippo, new total generated premium during the quarter despite challenging market conditions.

Speaker 4: By the end of this year, non-HIPO TGP will be triple the level it was at the end of 2021. We've been consistently adding to our portfolio of carriers to attract agency partners. And in Q3, we hit a new record with over 20,000 agency appointments granted, representing 3x growth from a year ago.

By the end of this year non <unk> will be tripled the level. It was at the end of 2021.

We've been consistently adding to our portfolio of carriers to attract agency partners and in Q3, we hit a new record with over 20000 agency appointments granted representing three X growth from a year ago.

Speaker 4: As we look forward to 2024, we expect continued revenue growth and expense savings to turn our services segment closer to positive operating income in the 2nd, half of 2024. Earlier than previously projected.

As we look forward to 2024, we expect continued revenue growth and expense savings to turn our services segment closer to positive operating income in the second half of 2020 for.

Earlier than previously projected.

Speaker 4: In our insurance as a service segment, adjusted operating income was steady at $4 million, up from $2 million in the year ago quarter. Year over year, TGP growth remains very strong at 72%. We see many opportunities for further growth in the market. Revenue grew 94%.

And our insurance as a service segment adjusted operating income was steady at $4 million up from $2 million in the year ago quarter year.

Year over year TDP growth remains very strong at 72% and we see many opportunities for further growth in the market.

Revenue grew 94% year over year.

Speaker 4: We continue to expand our Spenaker platform while maintaining our high standards for due diligence, underwriting and expenses.

To expand our spinnaker platform, while maintaining our high standards for due diligence underwriting and expense discipline.

Speaker 4: The HIPAA Home Insurance Program's adjusted operating law for $32 million was its best quarter since our IPO.

The Hippo home insurance program adjusted operating loss of $32 million was its best quarter since our IPO.

Speaker 4: Underwriting and pricing actions taken in 2022 and 2023, continued expense control, and improved underwriting performance and improved reinsurance treaty terms all contributed.

Underwriting and pricing actions taken in 2022 and 2023.

Continued expense control and improved underwriting performance and improved reinsurance treaty terms all contributed.

Speaker 4: Total generated premium in this segment was 95 million, up 1% over the prior year quarter. As underwriting and pricing actions we took in 2022 and early 2023 resulted in higher rates that offset an intentional reduction in underlying policy count and exposure. We expect our recent actions to result in additional TGP declines in 2024. this slide too.

Total generated premium in this segment was $95 million up 1% over the prior year quarter as underwriting and pricing actions. We took in 2022 in early 2023.

And higher rates that offset an intentional reduction in underlying policy count and exposure.

We expect our recent actions to result in additional TDP declines in 2024.

Speaker 4: Our aim is to materially reduce our exposure to the hail and storm risk, which have caused a disproportionate percentage of our loss of today.

Our aim is to materially reduce our exposure to the hail storm risk, which have caused a disproportionate percentage of our losses to date.

Speaker 4: The HIPAA Home Insurance Programs Revenue in the quarter of $29 million was up 77% over the prior year. Largely reflecting higher premium retention in our 2023 re-insurance treaty versus our 2022 treaty.

The Hippo home insurance program revenue in the quarter of $29 million was up 77% over the prior year, largely reflecting higher premium retention in our 2023 reinsurance treaty versus our 2022 treaty.

Speaker 4: In addition, we benefit from organic growth in TGP and higher investment in...

In addition, we benefited from organic growth and PGP and higher investment income.

Speaker 4: HHIP's Q3 growth loss ratio was 75%.

Hh Ip's Q3 gross loss ratio was 75%.

Speaker 4: excluding PCS caps and prior year development. The core gross loss ratio was 69% versus 82% in the prior year quarter.

<unk> PCF cats and prior year development, the core gross loss ratio was 69% versus 82% in the prior year quarter.

Speaker 4: The losses from the large hail storms during the 2nd quarter have been developing favorably. And as a result, we've chosen to release 11.8M of net reserves associated with these storms.

The losses from the large hailstorms during the second quarter have been developing favorably and as a result, we've chosen to release $11 8 million of net reserves associated with these storms.

Speaker 4: While we're pleased with the progress, we expect the more aggressive actions we've taken in recent months to drive even better results in the future, but significantly lower volatility.

While we're pleased with the progress we expect the more aggressive actions we've taken in recent months to drive even better results in the future, but significantly lower volatility.

Speaker 4: HHIPs adjusted operating expenses, excluding loss and loss of adjustment expense for $26 million in the quarter. Down from $38 million a year ago.

<unk> adjusted operating expenses, excluding lots and lots of adjustment expense were $26 million in the quarter down from $38 million a year ago.

Speaker 4: As a percentage of TGP, these operating expenses were 27% versus 40% in the year-ago quarter.

As a percentage of PGP. These operating expenses were 27% versus 40% in the year ago quarter.

Speaker 2: While we are pleased with this improvement, we expect even more improvement going forward as a significant portion of our recent expense reduction actions will focus on this segment. Thanks.

While we are pleased with this improvement we expect even more improvement going forward as a significant portion of our recent expense reduction actions. We're focused on this segment.

I'd now like to update our guidance for 2023.

Speaker 4: For the full year, we now expect an adjusted EVA dot-lots of between 207 and 212 million compared with our previous range of between 208 and 218 million.

For the full year, we now expect an adjusted EBITDA loss of between 207 and $212 million compared with our previous range of between 208 and $218 million.

Speaker 4: We now expect 2023 revenue of between 190 and 195 million, up from our previous estimate of 178.

We now expect 2023 revenue of between 190 and $195 million.

Up from our previous estimate of $178 million.

Speaker 4: and our 2023 TGP estimate remains 1.1 billion.

And our 2023 CGP estimate remains $1 1 billion.

Speaker 4: We expect to provide more detailed 2024 guidance when we report our results for the fourth quarter of this year.

We expect to provide more detailed 2024 guidance when we report our results for the fourth quarter of this year.

Speaker 4: Thank you for joining us today. And now I'd like to turn the call back over to the operator to ask you a question.

Thank you for joining us today, and now I'd like to turn the call back over to the operator for your questions.

Thank you.

Speaker 1: If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to remove your question, press star followed by two. And as a reminder, if you're using a speaker phone, please pick up your handset.

If you would like to ask a question. Please press star followed by one on your telephone keypad.

If you would like to remove your question Press Star followed by Tim.

And as a reminder, if youre using a speakerphone.

Please pickup your handset before asking a question.

Our first question today comes from Yaron <unk> with Jefferies.

Please proceed.

Speaker 5: Thank you, good afternoon. First, I also want to extend my condolences to HIPAA employees, family and friends in Israel and to the people of Israel in the face of the horrors of the last few weeks.

Thank you. Good afternoon first I also want to extend my condolences.

Employee's family and friends in Israel.

And to the people of visual in the face of the horrors of the last few weeks.

Speaker 5: and with regards to maybe the more mundane.

And with regards to maybe the more mundane.

Speaker 5: I want to start maybe with the decision to temporarily pause underwriting new homeowners business. In August , Rick, I think you called it a bold. Uh, step, I think 1 could also help you be drastic. Um, and.

I want to start maybe with the decision to temporarily pause underwriting new homeowners business.

August start Rick I think you called it a bold.

Steph.

One could also help you be drastic.

And.

Speaker 5: certainly more drastic than what we've seen from, let's say, other insurers in the past when they decided to retrench or pull out of certain regions or lines. Can you maybe walk through the decision to take such a bold action as opposed to maybe less pronounced measures? And to what extent do you see that as potentially impacting your relationships with partners and agents going forward?

Certainly more drastic than what we've seen from let's say other insurers in the past when we decided to retrench or pull out of certain regions or lines.

Can you maybe walk through the decision to take such a bolt action as opposed to maybe less.

Less pronounced measures and.

To what extent do you see that potentially impacting.

Your relationships with partners and agents going forward.

Speaker 3: Yeah, thanks, Yaron, for the question and thank you for the condolences to all those impacted.

Yes, Thanks, John for the question and thank you for the condolences to all those impacted.

Speaker 3: I think first of all, the reason we think it's a bold decision is our objective is to accelerate the path of profitability as quickly as possible.

I think first of all the reason we think it's a bold decision as our objective is to accelerate the path to profitability as quickly as possible and take the measures we need to do to guarantee the achievement of doing so so we wanted to make sure we have rate adequacy, we had the appropriate terms and conditions the appropriate deduct.

Speaker 3: and take the measures we need to do to guarantee the achievement of doing so. So we wanted to make sure we had rate adequacy, we had the appropriate terms and conditions, the appropriate deductibles.

<unk> understanding the costs associated with with our distribution partners and get all of that right before we started either increasing.

Speaker 3: understanding the costs associated with our distribution partners and get all of that rights before we started either increasing.

Speaker 3: problematic situations and then reopening. So what we have done.

Problematic situations and then reopening so what we have done is we have already begun reopening in the builder channel. So we've opened it up and most of the states that we do business. In we've also simultaneously increased rates increased deductibles change terms or conditions change the way that we have.

Speaker 3: is we have already begun reopening the builder channel. So we've opened it up in most of the states that we do business in.

Speaker 3: We've also simultaneously increased rates, increased deductibles, changed terms of conditions, changed the way that we are paying our distribution partners.

Our distribution partners.

Speaker 3: And as those take effect in various states, we are then opening up those states, provided that they do not create increased volatility to the portfolio. In fact, every action that we're doing is to have disproportionate impact on the PMLs versus the premiums.

And as those take effect.

<unk> in various states. We are then opening up those states provided that they do not create increased volatility to the portfolio. In fact every action that we're doing is to have disproportionate impact on the <unk> versus the premium.

Speaker 3: And we're excited by the progress that we've made early on as we have these conversations with our distribution partners, they recognize this is not a HIPAA only problem that the industry is suffering and that we all have to work together to make sure that we have a profitable environment and a healthy market going forward.

And we're excited by the progress that we've made early on as we have these conversations with our distribution partners. They recognize this is not a hippo only problem that the industry is suffering and that we all have to work together to make sure that we have a profitable environment and a healthy market going forward.

Speaker 3: Certainly, distribution partners wish that there was some consistency and some stability, but consistency and stability can be measured over time. And that is what we have provided them thus far.

Certainly distribution partners wish that there was some consistency and some stability, but consistency and stability can be measured over time and that is what we have provided them thus far.

Speaker 5: And do you have any sense how long it will take till you're fully back in business?

And do you have any sense, how long it will take till you're fully back in business.

Speaker 3: Yeah, I do think that we will come back gradually and we will come back gradually as these different actions take effect.

Yes, I do think that we will come back gradually and we will come back gradually as these different actions take effect, but I do think youre going to see us opening more and more by second half of 2024.

Speaker 3: But I do think you're going to see us opening more and more by second half of 2024. But again, I just want to be very clear, we will only open in areas that we have the right adequacy, the right deductibles and reduce volatility. We have lots of growth coming from other aspects of our business.

But again I just want to be very clear, we will only open in areas that we have the rate adequacy, the right deductibles and reduce volatility we have lots of growth coming from other aspects of our business.

Speaker 3: One thing to keep in mind, as I mentioned in my opening remarks, that 65% of HIPAA's TGP is coming from the non-HHIP program.

One thing to keep in mind as I mentioned in my opening remarks that 65% of hit those T. G P.

Is coming from the non Hh IP program and those.

Speaker 3: companies or those divisions are doing very, very well. And we expect to continue to lean on them while we're improving the volatility in the terms and conditions of the HHIP program.

Companies are those divisions are doing very very well and we expect to continue to lean on them. While we're in proving the volatility in the in the terms and conditions of the HIV program.

Speaker 5: Got it. And actually, the latter half of your response is a good segue to my next question. With regards to Spinnaker.

Got it and actually the latter half of your responses as a good segue to my next question.

With regards to the number.

Speaker 5: Do you view it as a core business? And I ask that because on the one hand, obviously it is part of the profitable segment of the three segments that the company has. And as you point out, it's a good...

Okay.

Do you view it as a core business and I ask that because.

On one hand, obviously it is part of the.

Profitable segment of the three segments that the company has.

You pointed out.

Speaker 5: very significant contributor to TGP. On the other hand, we have seen some industry headlines talking about maybe looking to sell the business and we've seen certainly other fronting assets for sale. So we'd love to hear your thoughts about Spinnaker in particular.

Very significant contributor to <unk> on the other hand, we have seen some industry headlines talking about maybe looking to sell the business and we've seen certainly other.

Fronting assets for sale, so would love to hear your thoughts about spinnaker in particular.

Speaker 3: Yeah, it's a really good question. And you bring up the two interesting aspects of how I'm going to answer that question. First of all, let me begin by saying we are thrilled with the asset that we have with Spinnaker. It is doing an exceptional job to the company.

Yes, it's a really good question and you bring up the two interesting aspects of how how I'm going to answer that question first of all let me begin by saying we are thrilled with the asset that we have with spinnaker is doing an exceptional job to the company.

Speaker 3: So when you ask, is it core to our mission of partnering with customers, helping them reduce losses in their home? I would say no. You can do that as an MGA and you don't have to have a carrier to necessarily do that.

So when you ask is it core to our mission of partnering with customers, helping them reduce losses in their home I would say no you can do that as an MGA.

And you don't have to have a carrier to necessarily do that that said when you do have the carrier and you have control of the balance sheet and control of the capacity. It's significantly derisk is derisked. The reliance on any third party. This was a risk that we had several years ago before we bought spinnaker.

Speaker 3: That said, when you do have the carrier and you have control of the balance sheet and control of the capacity, it significantly de-risks the reliance.

Speaker 3: on any third party. This was a risk that we had several years ago before we bought Spinnaker, and we think that hypothesis stands true. Having Spinnaker de-risks the business, and it allows us to continue to help our customers reduce risk.

And we think that hypothesis stands true, having spinnaker derisked the business and it allows us to continue to help our customers reduce risk and of course as you correctly pointed out it does contribute positively both to GGP and to EBITDA. So.

Speaker 6: And of course, as you correctly pointed out, it does contribute positively both to TGP and to EBITDA. So, as I said, we think the business is doing very well. We like the business. We won't comment on rumors within the marketplace, but I think I've been very clear on how we view that business. Thank you, all of you. Thank you.

As I said, we think the business is doing very well, we like the business, we won't comment on rumors within the marketplace, but but I think I've been very clear on how we view that business.

Thank you I'll re queue.

Thanks, Ron.

Our next question comes from Tommy <unk> with <unk>. Please.

Please proceed.

Speaker 7: Hey, good evening guys. Thanks for taking my questions. The first one is just around the decision you guys had or announcement about kind of pulling forward the expectations for the timing of when you'll turn even a profitable. Can you just walk through the components of sort of what brings that timeline forward? How much of that is the staff reductions on the expense side? How much is better underwriting with the HHIP side?

Hey, good evening guys. Thanks for taking my questions.

First one is just around the.

And a decision that you guys had or announcement about kind of pulling forward the expectations for the timing of when you'll turn EBIT unprofitable.

Can you just walk through the components of sort of what brings that timeline forward how much of that is the staff reductions on the expense side, how much is better underwriting within that HHS IP side.

Other components.

Speaker 4: Hey Tommy, this is Stuart. Thanks for the question. I think that you've hit on a number of the most significant drivers and this is.

Hey, Tony This is Stuart thanks for the question.

I think that you've hit on a number of the most significant drivers.

Speaker 7: with the exception of the expense reduction, which I'll talk about in a second. A lot of the answers are gonna be a recurring theme from some of the conversations we've had.

A.

The exception of the expense reduction, which I'll talk about in a second.

A lot of the the answers are going to be a recurring theme from some of the conversations we've had in the prior quarter. So the.

Speaker 7: in the prior quarters. So the, you know, the loss ratio improvement, which is probably the biggest driver of the HIPAA Home Insurance Program's segments profitability, make we're very pleased with the progress that we've made there, continuing to see.

The loss ratio improvement, which is probably the biggest driver of the Hippo home insurance programs segment's profitability. We're very pleased with the progress that we've made there continuing to see very large meaning like meaningful year over year improvement in our core non tcs loss ratio.

Speaker 7: very large meaningful year over year improvement in our core non-PCS loss ratio. We're also, as Rick mentioned, taking aggressive action to reduce the volatility from...

We're also as Rick mentioned, taking aggressive action to reduce the volatility from the kind of Pts events that impacted us last quarter and that has been accounting really for the the <unk>.

Speaker 7: kind of PCS events that impacted us last quarter and that have been accounting really for the bulk of our losses in the history of the company, reducing exposure to wind and hail. By reducing the exposure in these areas, it allows us to rely less on expensive reinsurance because we have less volatility in the portfolio.

Bulk of our losses in the history of the company, reducing exposure to wind and hail by reducing the exposure in these areas. It allows us to rely less on extensive reinsurance.

Because we have less volatility in the portfolio.

Speaker 7: And as we've talked about in previous quarters, the many rate filings and other rate actions that we've taken in 2022 and earlier this year in 2023 are going to start to show up in a more substantial way over the course of the rest of this year and into 2024. So the loss ratio improvement.

And as we've talked about in previous quarters, the many rate filings and other rate actions that we've taken in 2022 and earlier. This year in 2023 are going to start to show up in a more.

Substantial way over the course of the rest of this year and into 2024, so the loss ratio improvement.

Speaker 7: while also reducing the volatility allows us to deliver a higher net underwriting profit going forward. So we think that we've made great progress on that and as we as we continue to get more data, you know, I expect our confidence will increase further.

While also reducing the volatility allows us to deliver a higher net underwriting profit.

Going forward. So we think that we've made great progress on that and as we as we continue to get more data I expect our confidence will increase further.

Speaker 7: Beyond that, the expense savings are significant. So right now we're estimating that we're going to save on an annualized basis somewhere between 50 and 75 million dollars relative to the pre-action cost structure in the business.

Beyond that the expense savings are significant.

So right now we're estimating that we're going to save on an annualized basis somewhere between 50 and $75 million relative to the pre action cost structure in the business a lot of that is employee reductions.

Speaker 7: A lot of that is employee reductions, which is a combination.

Which is a combination of slightly lower volumes and Hh IP in terms of business that we're writing on our own.

Speaker 7: slightly lower volumes and HHIP in terms of business that we're writing on our own program at the Post-The Third Party business.

Our own program as opposed to third party business.

Speaker 7: But we're also benefiting from the investments that we've made in the past. It is now possible for our business.

But we are also benefiting from the investments that we've made in the past it is now possible for.

Our business teams to be able to.

Speaker 7: to be able to, sorry, it's 50 to 70 million. It's now possible for our business teams to make many of the rate filings and changes because of tools that our engineering teams have built. We are very pleased with the progress that we've made in building our team in Poland. We think of them as a core part of our,

Sorry, it's $50 million to $70 million.

It is not possible for our business teams to make many of the the rate filings and changes because of the tools that our engineering teams have built.

We are very pleased with the progress that we've made in building our team in Poland, We think of them as a core part of our.

Speaker 7: development efforts going forward, they're doing a great job. And as we shift away from the

Our development efforts going forward Theyre doing a great job.

And as we shift away from the.

<unk>.

Speaker 7: need to build more features and other things in the short term into the platform, we expect to save significant dollars there.

The need to build more features and other things in the short term in the into the platform.

To save significant dollars there.

Speaker 7: I think we're also doing the other things that you might expect, thinking about vendor costs and facilities expense.

I think we're also doing the other things that you might expect thinking.

Thinking about vendor costs and facilities expense.

Speaker 7: the cost of information and data that we're using for underwriting. So it's a broad-based program of actions that are designed to help speed the path to profitability. And we feel very excited and confident that we are making that turn here.

The cost of information and data that we're using for underwriting so.

A broad based program of action that are designed to help speed the path to profitability and we feel very excited and confident that we are making.

Making that turn here.

And so.

Speaker 7: Got it. Thanks for the response. My second question is somewhat following us up on.

Got it thanks for the thorough.

Response, My second question is somewhat following up on that.

Speaker 8: the previous question, thinking about the HIPAA home insurance program and the expectations for that to decline next year, obviously, as the pause takes time to be reopened, can you envision a scenario where that business shrinks for an extended period and just becomes generally a smaller piece of the franchise value at the same time while growth remains ongoing in the insurance of the service and on the services side? Is that a scenario that you can envision?

The previous question thinking about the Hippo home insurance program and the expectations faster decline next year, obviously, it's their deposit takes time for to be reopened.

Can you envision a scenario where that business shrinks for an extended period and.

And just becomes generally a smaller piece of the franchise value at the same time, while growth remains ongoing and the insurance as a service and almost services side is that a scenario that you can envision.

Speaker 7: I think I would frame it slightly differently. Tommy, I think what I would say, as Rick mentioned earlier,

I think I would frame it slightly differently, Tommy I think what I would say as Rick mentioned earlier.

Yes.

Speaker 7: We are open to writing new business where we think we can do so without losing money.

We are open to writing new business, where we think we can do so without losing money.

Speaker 7: or without high levels of volatility. So we need to have a rate adequacy and it needs to be something that is not adding to the overall volatility of the portfolio.

Or without high levels of volatility so we need to have rate adequacy and it needs to be something that is not adding to the overall volatility of the portfolio, that's going to get easier over time as more of the rate filings that we have put in place are rolled out and as more of the terms and condition changes.

Speaker 7: That's going to get easier over time as more of the rate filings that we have put in place are rolled out. And as more of the terms and conditions changes, raising deductibles and that sort of thing work their way into the system. Again, I don't think we're alone making these changes.

Bracing deductibles and that sort of thing.

It worked their way into the system again, I don't think we're alone making these changes.

Speaker 7: So I think what we're more likely to see is a temporary slowdown and kind of shrinking in the HIPAA Home Attracts Program.

So I think what we're more likely to see is a temporary slowdown.

And kind of shrinking in the Hippo home insurance program.

Speaker 7: while we reassess our underwriting appetite and our risk appetite, while the other pieces of our business continue to grow quickly, our

Well, we reassess our underwriting appetite and our risk appetite, while the other pieces of our business continue to grow quickly.

R.

Speaker 4: our objective of helping our customers protect their homes has not changed and we think that we can assist them in making themselves more attractive to either our carrier or third-party carriers through the home care services that we're offering and by being a differentiated agency in the market.

Our objective of helping our customers protect their homes has not changed and we think that we can assist them and making themselves more attractive to either our carrier or third party carriers through the home care services that we're offering and by being a.

Differentiated agency in the market.

Okay.

Got it thank you.

Our next question comes from Alex Scott with Goldman Sachs. Please proceed.

Speaker 9: Hi, good afternoon everyone. First question I have is, you can help us think through, you know what this will do to the trajectory of overall revenue, you know, I'm just thinking through.

Hi, good afternoon, everyone.

First question I had is.

You can help us think through.

What this will do to the trajectory of overall revenue.

Thinking through.

Speaker 9: you know, in the services segment and agency, you know, less risk, but also less revenue per dollar premiums in that model. You know, is that going to cause, you know, overall revenue growth to significantly slow and could help us think through what that looks like?

The services segment and agency.

Less risk, but also less revenue per dollar premiums in that model.

Is that going to cause overall revenue growth to significantly slow and could you help us think through what that looks like.

Speaker 7: Yeah, happy to start. And then if you have follow up questions, I'm happy to try to clarify. I don't think it's true that you'll see less revenue per dollar premium in the HIPAA Home Insurance Program segment. I think in fact, the opposite is true. And you're seeing that show up in the numbers. I think we've talked in past quarters about how we've retained.

Yes happy to happy to start and then if you have follow up questions I'm happy to try to clarify I don't think its true that you'll you'll see less revenue per dollar of premium in the HIPAA home insurance program segment I think in fact, the opposite is true.

And Youre seeing that show up in the numbers I think we've talked in past quarters about how we've retained.

Speaker 7: some premium and we'd seed it off some premium. And then we recognize commission income for the premium that we'd seed it off when we use quota share, re-insurance.

Some premium and we've seen it off some premium and we.

We recognized commission income for the premium that we seeded off when we use quota share reinsurance in.

Speaker 7: In 2023, we're using less quota share reinsurance. And while we are retaining more premium, we're not necessarily retaining dramatically more risk. I think earlier in the year, we showed a slide where we talked about.

In 2023, we're using less quota share reinsurance and while we are retaining more premium we're not necessarily retaining dramatically more risk I think.

Earlier in the year, we showed a slide where we talked about.

Speaker 7: the closing of the gap between risk retention and premium retention. In our 2022 Rain Turrence Treaty, we were retaining a disproportionate percentage of the risk.

The closing of the gap between risk retention and premium retention in our 2022 reinsurance treaty, we were retaining a disproportionate percentage of the risk.

Speaker 7: because of the way our reinsurance treaty was structured. And that we're moving away from that kind of reinsurance. And so what you'll see is per dollar premium, per dollar gross premium, you should actually see higher revenue per dollar premium rather than lower revenue because we'll have higher earned premium. And you can see that in this quarter, in the HIPAA Home Insurance Program, with revenue up 77%.

Because of the way our reinsurance treaty restructured.

And that we're moving away from that kind of of reinsurance and so what youll see as per dollar of premium per dollar gross premium you should actually see higher revenue.

Per dollar of premium rather than lower revenue, because we will have higher earned premium and you can see that.

In this quarter in the HIPAA home insurance program with revenue up.

77% and total generated premium up only 1%.

Speaker 4: total generated premium up only 1%. So I think...

Speaker 4: We will see continued growth in services segment, we'll see continued growth in insurance as a service, and we will not, I don't think we're gonna see an erosion of economics in the HIPAA Home Insurance Program. I think we're gonna see, in fact, the opposite, and it's gonna start to, all of the work we've been doing over the past few years, it's gonna start to show itself in the reported financials, which is something that we're quite excited about.

I think we will see continued growth in services segment will see continued growth in insurance as a service.

And and and we will not I don't think we're going to see an erosion of economics in Hippo home insurance program I think we're going to see in fact, the opposite and we're going to it's going to start to.

All of the work we've been doing over the past few years, it's going to start to show itself in the reported financials.

Which is something that we're quite excited about.

Speaker 9: But I guess one piece of my question was also just when you're sending business to the services segment as just an agency relationship rather than writing it through HIPPO home insurance, I assume it would be the case that you're going to have a lot less of revenue for those premium dollars than you would have writing it through HIPPO.

But I guess.

One piece of my question was also just when you're writing.

You're sending business to the services segment as just an agency relationship rather than writing it through April home insurance.

I assume it would be the case that you're going to have a lot less revenue for those premium dollars. Then you would of running it through Hippo.

Speaker 9: Home insurance because you're just the broker, right? You're not taking risks. So, you know, is that, do we need to think about that? Is a revenue headwind, just that makeshift? And is that gonna get more significant, I guess? Is what I was trying to get at?

Home insurance, because youre, just the broker right youre not taking risks so.

Do we need to think about that as a revenue headwind just that mix shift and is that going to get more significant I guess, what I was trying to get at.

Speaker 7: Yeah, I don't actually think so. I mean, I think the...

Yes, I don't I don't actually think so.

I think.

Speaker 4: You know, the benefit of the revenue in the service segment is that there is no loss and loss of just an expense associated with it. It is, it's a much more profitable on a variable basis business than the risk taking piece of our business. And so I believe that the, you know,

<unk>.

The benefit of the revenue in the services segment.

There are no loss and loss adjustment expense associated with it it is.

It's a much more profitable on a variable basis business than than the risk taking piece of our business and so I I.

Aleve that.

The services.

Speaker 4: revenue is growing faster than the home insurance than the hippo home insurance premium. So I don't see it as a headwind. I mean, we think about those as distinct.

Revenue is growing faster than the home insurance and the Hippo home insurance premium.

So I don't see it as a headwind I mean, we think about those as distinct.

Speaker 4: aspects of our business. We think about the HIPAA Home Insurance program as the...

Aspects of our business when we think about the HIPAA home insurance program.

Speaker 4: sort of risk taking piece of what we do. And we think about the services and the insurance of the service as the

Sort of risk taking a piece of what we do and we think about the services and the insurance as a service.

The.

Speaker 4: lower risk exposed pieces and in fact services not having any risk exposure so I think it's on a balance it will make the business.

Lower risk exposed pieces and in fact services not having any risks et cetera. So.

I think on balance it will make the business.

Speaker 4: a higher variable contribution margin and also more predictable over time as we see a mixed shift towards services and insurance as a service, both of which are continuing to grow. rapidly while we work to understand and kind of refactor our risk appetite within the home owners.

Higher variable contribution margin and also more predictable over time as we see a mix shift towards services and insurance as a service both of which are continuing to grow rapidly while we work to understand and kind of re factor our risk appetite within the homeowners business, Alex and it's Rick.

Speaker 3: Yeah, Alex, it's Rick. And I do want to double down what Stuart said in answering Tommy's question and sort of my comments on Geron's question. So we do not look at our pause as a long-term pause. We look at as a way to ensure the fact that any business that we write on HHIP is profitable business. Therefore, the country

I do want to double down what Stuart said.

Entering Tommy's question and sort of my comments on your answer question. So we do not look at our pause as a long term pause we look it as a way to ensure the fact that any business that we write on Hh IP is profitable business. Therefore, the contribution by <unk>.

Speaker 3: by premium dollars in our agency when you're sort of doubling the fact that you get the underwriting profit in the agency premium, we want to make sure that that outweighs any volatility that we might have that would deteriorate those longer term economics. So I think your question if we were looking to intentionally shrink or to have a prolonged period of...

Premium dollars and our agency when Youre sort of double doubling and the fact that you get the underwriting profit in the and the agency premium we want to make sure that that outweighs any volatility that we might have that would deteriorate those longer term economics. So I think I think your question if we were.

Looking to intentionally shrink or to have a prolonged period of slowdown that might be correct, but this is merely a resetting and establishing the right portfolio, we want to reduce volatility yet rights premium business, both direct and through.

Speaker 3: of a slow down that might be correct, but this is merely a resetting and establishing the right portfolio we want to reduce volatility yet rights premium business. Both direct and through other parts.

Two other partners.

Speaker 9: Got it understood if I could think one more in, are you seeing any impact to sort of the home care aspect of the business? I know you guys were sort of rolling out an app and trying to get. Users going there on some of those products that are sort of separate from the insurance business altogether. Is this going to sort of pause that? I mean, how do I think to the impact of that?

Got it.

Understood and if I could sneak one more in.

Are you seeing any impact to sort of the home care aspect to the business. I know you guys were sort of rolling out an app.

Trying to get.

Users going there on some of those.

<unk> that are sort of separate from the insurance business altogether.

Is this going to is this going to sort of parse that.

How do I think through the impact to that business.

Speaker 3: Yeah, Alex, that's a really good question. I think, interestingly enough, if anything.

Yes, Alex that's a really good question I think interestingly enough if anything.

Speaker 3: Our ability to offer home care services over customers, whether they are HIP customers or agency customers, increases the universe of potential revenue from that particular customer base. And so now, our app is available to any home owner throughout the United States, whether they're a hippo homeowner customer or not, and over time, the ability to monetize insurance in that home care.

Our ability to offer homecare services over customers, whether they are <unk> IP customers or agency customers increases the universe of potential revenue from that particular customer base and so now our app is available to any homeowner throughout the United States whether they.

Hippo homeowner customer or not and over time, the ability to monetize insurance in that home care.

Speaker 3: sort of situation actually increases, and it increases as an agency disproportionately to how much it would increase in the HHIP segment. So it's actually the opposite, frankly. We're getting more traction. We're getting more traction.

Sort of situation actually increases and it increases as an agency disproportionately to hit how much it would increase in the <unk> segment. So.

It's actually the opposite frankly, we're getting more traction when we bundle it as a value to an agency customer than if we only.

Speaker 3: when we bundle it as a value to an agency customer, then if we only created an opportunity for HHIP only customers.

Created an opportunity for <unk> only customers.

Speaker 9: Any KPIs in that business that we should think about? I'm just trying to gauge, like, you know, when you talk about the success of rolling some of that out and whatnot, how do we measure that?

New kpis in that business.

You should think about I'm, just trying to gauge like.

When you talk about the success of raw and Smackdown, and whatnot, how do we measure that.

Speaker 3: Yeah, I think in our 2024 guidance, we'll do a better job of explaining to you what we expect to see on there. We have said previously that we have, gosh, we're close to 100,000 app installed users and our...

Yes.

I think in our 2024 guidance, we will do a better job of explaining to you what we expect to see on there we have said previously.

We have guests were close to $100, an app installed users and hours.

Speaker 3: Our monthly active user number has been increasing, but let us get back with you when we're prepared to share more guidance around that in Q4.

Our monthly active user number has been increasing but but let us get get back with you and we're prepared to share more guidance around that in Q4.

Okay, great. Thank you.

Thanks, Alex.

Speaker 1: Our next question comes from Carol Camillo with Citizens' JMP. Please proceed.

Our next question comes from Carol can you lift citizens JMP.

Please proceed.

Speaker 10: Yes, hi. I was just kind of get more color on the growth process, particularly the insurance services. I mean, is there anything new that you can think of in terms of growing that business? Is there some kind of leverage you can use to grow more?

Yes, hi.

I was just kind of give more color on the growth prospects, particularly the.

Insurance services I mean is there anything new that you can think of in terms of growing that business.

Is there some kind of leverage you can use to grow anymore.

Speaker 3: Yeah, it's a really good question. I think there are no shortage of opportunities in the frontine and insurance of the service segment. And we have a very full funnel of opportunities with MGA's and other partners in that area. One thing that positively benefits us.

Yes, it's a really good question I think there are no shortage of opportunities in the frontier and insurance as a service segment and we have a very full funnel of opportunities with MGH and other partners in that area. One thing that positively benefit US is there are others that are in this.

Speaker 3: Is there are others that are in this space that did have fairly significant exposure to the best 2 situation and we had no exposure to the best 2 situation. So we are actually picking up. Um, programs that are meeting capacity, given the right off that some others have had to face in that particular area. So. From a growth perspective there, there is no shortage of opportunities for that to continue.

Space that did have fairly significant exposure to the west to situations and we have no exposure to divest two situation. So we're actually picking up.

Programs that are needing capacity given the write offs that some others have had to face in that particular area. So.

From a growth perspective, there is no shortage of opportunities for that to continue to grow.

Speaker 7: I think we're also seeing growth. We're also seeing growth.

I think we're also seeing.

Growth, we're also seeing growth.

Speaker 4: Fairly substantial growth from some of our existing programs as well. So we really have multiple letters, right? We have. Existing programs that are growing year over year and as Rick said. There are a number of programs that are looking for. A partner on the fronting business, and we're excited to be able to support them.

Fairly substantial growth from some of our existing programs as well. So we really have multiple levers right we have exist.

Existing programs that are growing year over year and as Rick said, there are a number of programs that are looking for.

Our partner on the fronting business and we're excited to be able to support them.

Speaker 10: All right, great, thank you. And then just one last question, I'm just curious because it kind of came up recently. In terms of the terms and conditions on the HIPAA home insurance program, are you thinking of any creative changes to their terms and conditions? For example, actual cost, roof replacement instead of the replacement cost of the roof replacement?

Alright, great. Thank you and then just one last question I'm, just curious because it kind of came up.

Recently.

The terms and conditions on the type of home insurance program is there are you are you thinking of any creative changes to the terms and conditions.

Example.

Actual costs.

<unk>.

Replacement incentives.

Instead of replacement cost.

Replacement.

Speaker 3: Yes, and in fact, we've implemented those already. This is part of this project to reduce volatility generally.

Yes, and in fact, we've implemented those already this is part of this project to reduce volatility generally.

Speaker 3: So we're doing all the things one would expect on increasing deductibles.

So we're doing all the things one would expect an increasing deductibles.

Speaker 3: changing the terms in conditions for placement costs or actual cash value versus replacement costs.

Changing the terms and conditions replacement costs, our actual cash value versus replacement cost.

Speaker 3: We're also looking at other partnerships or other avenues.

Also looking at other partnerships or other avenues that might make sense to stabilize the ses exposures, whether it's a partnership with roofers with hardened roof materials, whether it's partnerships with parametric providers because when you increase the deductibles that puts a significant burden.

Speaker 3: that might make sense to stabilize the FES exposures, whether it's a partnership with Rufers.

Speaker 3: with hardened roof materials, whether it's partnerships with parametric providers, because when you increase the deductibles, that puts a significant burden on the customer. Is there a way for them to buy that deductible down through a different risk bucket? So we're looking at a lot of structural things that we can do because, frankly, this is an industry problem. The SES exposure is increasing. It's not shrinking. Much of the tech world is KGB- sounding.

The customer is there a way for them to buy that deductible down through a different risk bucket. So we're looking at a lot of structural things that we can do because frankly this is an industry problem. The SCS exposure is increasing its not shrinking.

Of the <unk>.

Speaker 3: Much of the burden has been placed on the primary carriers over the last year or two and we think that there needs to be

Of the burden has been placed on the primary carriers over the last year or two and we think that there needs to be.

Speaker 3: a settling of that disproportionate burden on the primary carriers mostly through the form of increase.

Settling of that disproportionate burden on the primary carriers, mostly through the form of increased increase deductibles and things as you mentioned cosmetic exclusions and actual cash value. So we're looking at a lot of different things as all part of this renewed effort to ensure reduction of vol.

Speaker 3: increased deductibles. And things as you mentioned, cosmetic exclusions and actual cast value. So we're looking at a lot of different things.

Speaker 3: as all part of this renewed effort to ensure reduction of volatility in the book.

Utility in the book.

Great. Thank you that's all.

Thanks.

Thank you for your question.

Speaker 1: As a reminder, it is star one to ask a question and star two to remove. Our next question is a follow-up from you-

As a reminder, it is star one to ask a question and start to move.

Our next question is a follow up from your <unk> with Jefferies.

Please proceed.

Speaker 10: Thank you. Two quick ones, I hope. One, the underlying loss ratio and HHIP. So excluding GATS and PYD seem to tick up a bit this quarter relative to the last two quarters. Any one off there and anything you could call out.

Thank you.

Two quick ones I hope when the underlying loss ratio and Hh IP. So excluding cats in PID seem to tick up a bit this quarter relative to the last two quarters.

Any one offs, there and anything you could call out.

Speaker 4: Hi, Ron Stewart. I think there is some seasonality of kind of interior water claims. I think we also had a very small number of non wildfire, total lots of fires in the quarter. So nothing that would make a trend.

Hi, Ron Stewart.

There is some seasonality.

Kind of interior water claims where I think we also had a very small number of non wildfire total lost fires in the quarter. So nothing nothing that would.

Would make a trend.

Speaker 4: Okay, but I would point back to the significant improvement year over year. Like there is there is some seasonality for this and while we do look quarter of a quarter is important, but the year over year is really where we spend most of our time.

Okay, but I would.

Pointing back to the significant improvement year over year.

There is there is some seasonality to that but while we do look quarter over quarter is important but the.

The year over year is really where we spend most of our clients.

Okay.

Speaker 10: And then can you offer the catastrophe and the PYD impacts to the net loss ratio?

And then can you offer the catastrophe in PID impact to the net loss ratio.

Speaker 4: Yeah, I think we published that in the in the shareholder letter. I missed that.

Yes.

We published that in the <unk>.

In the shareholder letter.

If I understood your question I missed that.

Okay I'll go back on what kind of Thats fine.

Speaker 10: And so maybe one last one then with the expense reduction program, are there particular OpEx lines that you think would be more significantly impacted?

And so maybe one last one then.

With the expense reduction program are there particular opex lines that you think would be more significantly impacted.

Speaker 4: Yes, I think it's more across the board. You know, because the employees exist in all of the lines, and we do have vendor savings that we're expecting in all the lines as well. So it's not going to be driven by any one place in the PNL, but an acceleration of the operating leverage trends that we're already seeing in the business and our operating expenses have declined.

Yes, I think it's more across the board.

The because the employees exists in all of the lines.

We do have vendor savings that we're expecting in all of the lines as well so.

It's not going to be driven by any one place in the <unk> in the P&L, but an acceleration of the operating leverage trends that were already seeing in the business and our operating expenses have declined.

Speaker 4: Even before these actions very, very substantially as a percentage of premium and as a percentage of revenue, this is just going to be an acceleration of that trend.

Even before these actions very very substantially as a percentage of premium and as a percentage of revenue. This is just going to be an acceleration of that trend.

Speaker 3: Yeah, you're on one thing I do want to add when we talk about payroll costs and payroll reductions. You know, two years ago we purchased Swing, which is a development house in Poland. We've actively been growing that operation and have increased the growth of that operation as of late. And so although payroll is coming down, it does not naturally.

Youre on one thing I do want to add when we talk about.

Payroll costs and payroll reductions two years ago, we purchased swing, which is a development house in Poland. We are at.

Actively been growing that operation and have increased the growth of that operation as of late and so.

Although payroll is coming down it does not naturally.

Speaker 3: You should not naturally assume that there's fewer people over the long term. It's a lower cost environment as well. The quality of work we get, we've been incredibly impressed over the last couple of years. And so we believe it, despite the fairly large headline number of payroll reduction, we still think that we can achieve the goals that we have for the company while getting profitable much quicker.

You should not naturally assume that there's fewer people over the long term, it's a lower cost environment as well the quality of work we get we've been incredibly impressed over the last couple of years and so we believe that despite the fairly large headline number of payroll reduction.

We still think that we can achieve the goals that we have for the company, while getting profitable much quicker.

Thank you.

Speaker 7: Thank you all for your questions. Yaron, I think I may have misspoke earlier. I think we published the impact of prior year.

Thank you all for your questions you Ron I think.

Your own I think I may.

I may have misspoke earlier, I think we we published the impact of prior year reserve releases and and the PCF breakdown.

Speaker 4: reserve releases and the PCS breakdown on a growth space. If I don't know that we put it in the letter on that basis, but let me get back to you on that.

On a gross basis I don't know that we've put it.

In the letter on a net basis, but let me get back to you on that.

Okay.

Yes.

Thank you all for your questions.

Speaker 1: We have no questions waiting at this time, so I will pass the conference back to the management team for any further remarks.

We have no questions waiting at this time, so I will pass the conference back to the management team for any further remarks.

Speaker 6: Great. Well, thank you everyone. Thank you operator. Thank you for joining the Steve's Neen. We're excited with the progress that we've been making in a very short period of time. And we're excited to be talking to you next quarter. Thank you very much.

Great well, thank you everyone and thank you operator, and thank you for joining this evening.

We're excited with the progress that we've been making in a very short period of time and we're excited to be talking to you next quarter. Thank you very much.

We will conclude today's conference call.

Thank you all for your participation you may now disconnect your line.